TY - JOUR

T1 - Fiscal illusion and cyclical government expenditure

T2 - state government expenditure in the United States

AU - Abbott, Andrew James

AU - Jones, Philip

PY - 2016/5/31

Y1 - 2016/5/31

N2 - A well‐established literature argues that fiscal illusion increases the level of government expenditure. This article focuses on the proposition that fiscal illusion also influences the cyclicality of government expenditure. Predictions are formed with reference to government reliance on high income elasticities of indirect tax revenues and on intergovernmental transfers. Predictions are tested with reference to the expenditures of 36 states in the United States from 1980 to 2000. Government expenditures are more likely to be procyclical when citizens systematically underestimate the cost of taxation.

AB - A well‐established literature argues that fiscal illusion increases the level of government expenditure. This article focuses on the proposition that fiscal illusion also influences the cyclicality of government expenditure. Predictions are formed with reference to government reliance on high income elasticities of indirect tax revenues and on intergovernmental transfers. Predictions are tested with reference to the expenditures of 36 states in the United States from 1980 to 2000. Government expenditures are more likely to be procyclical when citizens systematically underestimate the cost of taxation.

KW - Fiscal Illusion

KW - Flypaper Effect

KW - Procyclical Public Spending

KW - Fiscal Illusion; FlypapeSub-Central Government Spending

U2 - 10.1111/sjpe.12095

DO - 10.1111/sjpe.12095

M3 - Journal article

VL - 63

SP - 177

EP - 193

JO - Scottish Journal of Political Economy

JF - Scottish Journal of Political Economy

SN - 0036-9292

IS - 2

ER -