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Do Anticipated Tax Changes Matter? Further Evidence from the United Kingdom

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  • F Bagliano

Abstract

This paper provides some evidence against the rational expectations-permanent income model of consumption behaviour and the Ricardian Equivalence proposition by testing the responsiveness of spending to the implementation of pre-announced changes in income tax. Extending the work of Summer (1991), a long series of recurrent episodes of this kind is for the U.K (1960-1990) is examined. It is found that consumption expenditure strongly reacts to (pre-announced) fiscally-induced changes in current disposable income. This effect is due to the semi-durable and durable components of spending.

Suggested Citation

  • F Bagliano, 1993. "Do Anticipated Tax Changes Matter? Further Evidence from the United Kingdom," CEP Discussion Papers dp0123, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0123
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    Cited by:

    1. Alejandro López & Martha Misas & Hugo Oliveros, 1996. "Understanding Consumption in Colombia," Borradores de Economia 058, Banco de la Republica de Colombia.
    2. Irina Khvostova & Alexander Larin & Anna Novak, 2016. "Euler Equation with Habits and Measurement Errors: Estimates on Russian Micro Data," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(4), pages 395-409.
    3. Tomas Wroblowsky, 2007. "Explaining the Variability of Debt Neutrality Tests Results: A Meta-Analysis of Ricardian Equivalence," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 5(1), pages 7-24.
    4. T. D. Stanley, 1998. "New Wine in Old Bottles: A Meta‐Analysis of Ricardian Equivalence," Southern Economic Journal, John Wiley & Sons, vol. 64(3), pages 713-727, January.

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