Ricardian Equivalence and National Saving in the United States

International Monetary Fund

No 1988/096, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the relative efficacy of cuts in government spending on goods and services and increases in taxation as tools for augmenting national saving--an issue related to Ricardian equivalence. The theoretical analysis shows little presumption in favor of spending cuts for this purpose and suggests that the issue is ultimately empirical. The empirical work for the United States suggests behavior close to zero Ricardian equivalence. Consequently, while there may be other reasons for favoring one approach or the other, cuts in government spending and increases in taxation appear broadly equivalent in terms of their impact on national saving.

Keywords: WP; Ricardian; consumer spending; equation; equivalence result; government spending variable; equivalence proposition; consumption equation; equivalence issue; household consumption behavior; Income; Personal income; Consumption; Private savings (search for similar items in EconPapers)
Pages: 36
Date: 1988-01-01
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Citations: View citations in EconPapers (1)

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