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The (In)validity of the Ricardian equivalence theorem-findings from a representative German population survey

Author

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  • Hayo, Bernd
  • Neumeier, Florian

Abstract

In this paper, we utilize data from a German population survey to test the validity of the Ricardian equivalence theorem (RET). In 2013, 2,000 representatively chosen people were asked whether they have altered their consumption and saving behavior in response to the significant increase in public debt that occurred between 2008 and 2012. Our findings reveal notable deviations from RET. However, we cannot rule out that the majority of Germans behave 'partly' in a Ricardian manner. This could either indicate a large fraction of rule-of-thumb or impatient consumers in the economy, or a widely prevalent mix of partially Ricardian and partially non-Ricardian behavior. Moreover, using multinomial logit regressions, we find that individuals' consumption responses are significantly related to their economic situation, time preferences, education, and age.

Suggested Citation

  • Hayo, Bernd & Neumeier, Florian, 2017. "The (In)validity of the Ricardian equivalence theorem-findings from a representative German population survey," Munich Reprints in Economics 55053, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:55053
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    Cited by:

    1. Lorenzo Esposito & Giuseppe Mastromatteo, 2019. "Defaultnomics: Making Sense of the Barro-Ricardo Equivalence in a Financialized World," Economics Working Paper Archive wp_933, Levy Economics Institute.
    2. Nektarios Michail & Theodosis Kallenos & Ioanna Evangelou, 2024. "Are agents Ricardian? Evidence from the CBC survey," Economics Bulletin, AccessEcon, vol. 44(3), pages 1147-1152.
    3. Richard McManus, 2018. "Fiscal Trade‐Offs: The Relationship Between Output and Debt in Policy Interventions," Manchester School, University of Manchester, vol. 86(S1), pages 50-82, September.
    4. Felbermayr, Gabriel & Boysen-Hogrefe, Jens & Braml, Martin & Mosler, Martin, 2020. "Finanzierungsoptionen für die zusätzliche Staatsverschuldung durch die Corona-Krise: Ist eine Vermögensabgabe zweckmäßig?," Open Access Publications from Kiel Institute for the World Economy 314953, Kiel Institute for the World Economy.
    5. Adem Yavuz Elveren & Ünal Töngür & Tristian Myers, 2023. "Military spending and economic growth: A post-Keynesian model," Economics of Peace and Security Journal, EPS Publishing, vol. 18(2), pages 51-65, October.
    6. Sebastian Blesse & Felix Rösel, 2017. "Gebietsreformen: Hoffnungen, Risiken und Alternativen," ifo Working Paper Series 234, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Dedák, István & Dombi, Ákos, 2025. "Mekkora az államadósság terhe?. Az államadósság hatása a gazdasági növekedésre a neoklasszikus növekedéselméletben [How much is the burden of public debt?. The impact of public debt on economic growth in neoclassical growth theory]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 669-693.
    8. Maarten van Rooij & Jakob de Haan, 2016. "Will helicopter money be spent? New evidence," DNB Working Papers 538, Netherlands Central Bank, Research Department.
    9. Ahmet Salih İkiz, 2020. "Testing the Ricardian Equivalence Theorem: Time Series Evidence from Turkey," Economies, MDPI, vol. 8(3), pages 1-20, August.
    10. Roth, Christopher & Settele, Sonja & Wohlfart, Johannes, 2022. "Beliefs about public debt and the demand for government spending," Journal of Econometrics, Elsevier, vol. 231(1), pages 165-187.
    11. Galindo-Martín, Miguel-Ángel & Castaño-Martínez, María-Soledad & Méndez-Picazo, María-Teresa, 2021. "Effects of the pandemic crisis on entrepreneurship and sustainable development," Journal of Business Research, Elsevier, vol. 137(C), pages 345-353.
    12. Bernd Hayo & Matthias Uhl, 2017. "Taxation and consumption: evidence from a representative survey of the German population," Applied Economics, Taylor & Francis Journals, vol. 49(53), pages 5477-5490, November.
    13. Antonio Focacci & Angelo Focacci & Alessandro Faenza, 2024. "The lens of the quantity theory of money to disentangle the perceived relationship between money growth and inflation: a PSVAR approach," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(3), pages 571-595, September.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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