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The Effects of Tax Shocks on Output: Not So Large, but Not Small Either

Roberto Perotti

American Economic Journal: Economic Policy, 2012, vol. 4, issue 2, 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)

JEL-codes: E23 E62 H22 H24 H25 K34 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/pol.4.2.214
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Handle: RePEc:aea:aejpol:v:4:y:2012:i:2:p:214-37