Dynamic Scoring: Alternative Financing Schemes

Eric Leeper and Shu-Chun Yang

No 12103, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Neoclassical growth models predict that reductions in capital or labor tax rates are expansionary when lump-sum transfers are used to balance the government budget. This paper explores the consequences of bond-financed tax reductions that bring forth a range of possible offsetting policies, including future government consumption, capital tax rates, or labor tax rates. Through the resulting intertemporal distortions, current tax cuts can be contractionary. The paper also finds that more aggressive responses of offsetting policies to debt engender less debt accumulation and less costly tax cuts.

JEL-codes: E1 H3 H6 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-fmk, nep-mac and nep-pbe
Note: EFG PE
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Citations: View citations in EconPapers (22)

Published as Leeper, Eric M. & Yang, Shu-Chun Susan, 2008. "Dynamic scoring: Alternative financing schemes," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 159-182, February.

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Journal Article: Dynamic scoring: Alternative financing schemes (2008)
Working Paper: Dynamic Scoring: Alternative Financing Schemes (2006)
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