American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
The Effects of Tax Shocks on Output: Not So Large, but Not Small Either
American Economic Journal: Economic Policy
vol. 4,
no. 2, May 2012
(pp. 214–37)
Abstract
I argue that, on theoretical grounds, the discretionary component of taxation should be allowed to have different effects than the automatic response of tax revenues to macroeconomic variables. Based on a novel dataset, I show two results. First, responses to a tax shock that allow for a distinction between the discretionary and the endogenous components of tax changes are about halfway between the large effects estimated by Romer and Romer (2010) and the smaller effects estimated, for instance, by Favero and Giavazzi (2012) or Blanchard and Perotti (2002). Second, there is almost no statistically significant evidence of anticipation effects. (JEL E23, E62, H22, H24, H25, K34)Citation
Perotti, Roberto. 2012. "The Effects of Tax Shocks on Output: Not So Large, but Not Small Either." American Economic Journal: Economic Policy, 4 (2): 214–37. DOI: 10.1257/pol.4.2.214JEL Classification
- E23 Macroeconomics: Production
- E62 Fiscal Policy
- H22 Taxation and Subsidies: Incidence
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- K34 Tax Law
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