Government Debt and Growth in Public Spending

Ilde Rizzo and Alan Peacock

Public Finance = Finances publiques, 1987, vol. 42, issue 2, 283-91

Abstract: A well-known proposition, derived from public choice theory, contends that the replacement of current tax financing by government borrowing reduces the perceived price of government goods and services and increases their demand. The authors examine two important empirical tests of this proposition by W. A. Niskanen (1978 ) and H. Shibata and Y. Kimura (1986) and offer reasons for questioning their conclusions. However, their support for the original proposition is derived not from the reduction in the perceived price of present government expenditure but from the perceived price of future expenditures, which will be reduced by the growth in government unfunded pension obligations.

Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:pfi:pubfin:v:42:y:1987:i:2:p:283-91

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