Experimentální ověření platnosti Barrovy-Ricardovy ekvivalence

Experimental Verification of Barro-Ricardo Equivalence Theorem

Petr Frejlich, Helena Chytilová, Vojtěch Kotrba and Pavel Kotrba

Politická ekonomie, 2023, vol. 2023, issue 4, 366-389

Abstract: The aim of this study is to verify the validity of Barro-Ricardo equivalence in Czech conditions with the help of experimental methods. Ricardian equivalence, in which case consumers postpone consumption under lower taxation, is a basic assumption of many studies dealing with intertemporal decision making and has important implications for government tax policy. Using nonparametric methods and panel data regression, we find that Ricardian equivalence does not hold in general. Our results suggest that taxation has a significant impact on consumption decisions. Over the life cycle, a tax cut increases consumption on average by 28.7% of the tax credit. Conversely, a tax increase causes a 27.8% increase in consumption on average. Using individual consumption time series, we find that approximately 70% of the tested individuals behave contrary to Ricardian equivalence. Our results show that a change in tax levels affects consumption in subsequent periods.

Keywords: Ricardian equivalence; consumption; taxation; laboratory experiment; life cycle (search for similar items in EconPapers)
JEL-codes: A13 B13 C32 E24 J21 J64 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.18267/j.polek.1387

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