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Empirical Tests of Ricardian Equivalence

Author

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  • Charles Bram Cadsby
  • Murray Frank

Abstract

The results of a series of experiments testing Ricardian equivalence are reported. The experimental design is based on an overlapping generations model similar to Barro (1974). Expansionary and contractionary fiscal policies are examined. When theory predicts a positive bequest, decision close to those predicted by Ricardian equivalence are observed after allowing for learning. The imposition of a binding non-negativity constraint on bequests produces the predicted Keynesian behavior. The cost of deviation from the theoretical equilibrium seem to be an important determinant of the variability of the observed decisions around the theoretical equilibrium.

Suggested Citation

  • Charles Bram Cadsby & Murray Frank, 1988. "Empirical Tests of Ricardian Equivalence," Working Papers 738, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:738
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    Cited by:

    1. Meissner, Thomas & Rostam-Afschar, Davud, 2017. "Learning Ricardian Equivalence," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 273-288.
    2. Ricciuti, Roberto, 2008. "Bringing macroeconomics into the lab," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 216-237, March.
    3. repec:pit:wpaper:334 is not listed on IDEAS
    4. Kirchsteiger, Georg & Mantovani, Marco & Mauleon, Ana & Vannetelbosch, Vincent, 2016. "Limited farsightedness in network formation," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 97-120.
    5. Leif Helland & Jon Hovi & Lars Monkerud, 2012. "Can exit prizes induce lame ducks to shirk less? Experimental evidence," European Journal of Government and Economics, Europa Grande, vol. 1(2), pages 106-125, December.
    6. Geiger, Martin & Luhan, Wolfgang J. & Scharler, Johann, 2016. "When do fiscal consolidations lead to consumption booms? Lessons from a laboratory experiment," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 1-20.
    7. Hayo, Bernd & Neumeier, Florian, 2017. "The (In)validity of the Ricardian equivalence theorem–findings from a representative German population survey," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 162-174.
    8. Bolton, Gary E. & Katok, Elena, 1998. "An experimental test of the crowding out hypothesis: The nature of beneficent behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 315-331, November.
    9. repec:egr:ejge00:v:1:i:1:p:106-125 is not listed on IDEAS
    10. repec:ebl:ecbull:v:8:y:2003:i:11:p:1-11 is not listed on IDEAS
    11. Artidiatun Adji & James Alm & Paul J. Ferraro, 2009. "Experimental tests of Ricardian equivalence with distortionary versus nondistortionary taxes," Economics Bulletin, AccessEcon, vol. 29(4), pages 2556-2572.

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