The Role of Beliefs for the Sustainability of the Fiscal Constitution
AbstractWhy does the government not defect from the constitution? This article focuses on the dynamic restraints the government faces under the rule of law: violations against unconstitutional laws are not punished under the constitution. If a violating government cannot commit itself never to reinstall the constitution enforcing an unconstitutional law becomes difficult. Citizens' expectations to go unpunished when not complying may be self-fulfilling. Deriving the equilibrium of a global game we show that this mechanism is effectively deterring a government from defecting from a constitutionally permissible tax rate.
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Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0213.
Date of creation: Feb 2002
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tax evasion; global games; self-fulfilling expectations; dynamic policy restraints;
Other versions of this item:
- Neumärker, Karl Justus Bernhard & Pech, Gerald, 2003. "The Role of Beliefs for the Sustainability of the Fiscal Constitution," CSLE Discussion Paper Series 2003-01, Saarland University, CSLE - Center for the Study of Law and Economics.
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- D7 - Microeconomics - - Analysis of Collective Decision-Making
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-06-14 (All new papers)
- NEP-LAW-2005-06-14 (Law & Economics)
- NEP-MAC-2005-06-14 (Macroeconomics)
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