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Comparative fiscal illusion: a fiscal illusion index for the European Union

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  • Roberto Dell’Anno

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  • Brian Dollery

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Abstract

This paper provides an empirical analysis of fiscal illusion by estimating an index of fiscal illusion for 28 European countries over the period 1995–2008 employing a structural equation approach. Using Multiple Indicators Multiple Causes models, the paper investigates the main indicators of fiscal illusion and develops an index of fiscal illusion. It concludes that the chief determinants for the deployment of fiscal illusion strategies are the share of self-employment on total employment, the educational level of citizens, and the size of tax burden. At the same time, policy makers attempt to ‘conceal’ the real tax burden by means of debt illusion, fiscal drag, wage withholding taxes, as well as taxes on labour. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Roberto Dell’Anno & Brian Dollery, 2014. "Comparative fiscal illusion: a fiscal illusion index for the European Union," Empirical Economics, Springer, vol. 46(3), pages 937-960, May.
  • Handle: RePEc:spr:empeco:v:46:y:2014:i:3:p:937-960
    DOI: 10.1007/s00181-013-0701-x
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    References listed on IDEAS

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    Cited by:

    1. Schnellenbach, Jan & Schubert, Christian, 2015. "Behavioral political economy: A survey," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 395-417.
    2. Schnellenbach, Jan & Schubert, Christian, 2014. "Behavioral public choice: A survey," Freiburg Discussion Papers on Constitutional Economics 14/03, Walter Eucken Institut e.V..
    3. Facchini, Francois, 2014. "The determinants of public spending: a survey in a methodological perspective," MPRA Paper 53006, University Library of Munich, Germany.
    4. Andreas Buehn & Roberto Dell’Anno & Friedrich Schneider, 2018. "Exploring the dark side of tax policy: an analysis of the interactions between fiscal illusion and the shadow economy," Empirical Economics, Springer, vol. 54(4), pages 1609-1630, June.
    5. Goel, Rajeev K. & Saunoris, James W. & Schneider, Friedrich, 2017. "Drivers of the Underground Economy around the Millienium: A Long Term Look for the United States," IZA Discussion Papers 10857, Institute for the Study of Labor (IZA).
    6. Soldatos, Gerasimos T., 2015. "An Anti-Austerity Policy Recipe against Debt Accumulation in the Presence of Hidden Economy," MPRA Paper 69911, University Library of Munich, Germany.

    More about this item

    Keywords

    Fiscal illusion; Financial illusion; MIMIC model ; European countries; H3; H8; 052;

    JEL classification:

    • H8 - Public Economics - - Miscellaneous Issues
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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