Empirical Tests of Ricardian Equivalence

Charles Cadsby and Murray Frank (murra280@umn.edu)

Working Paper from Economics Department, Queen's University

Abstract: The results of a series of experiments testing Ricardian equivalence are reported. The experimental design is based on an overlapping generations model similar to Barro (1974). Expansionary and contractionary fiscal policies are examined. When theory predicts a positive bequest, decision close to those predicted by Ricardian equivalence are observed after allowing for learning. The imposition of a binding non-negativity constraint on bequests produces the predicted Keynesian behavior. The cost of deviation from the theoretical equilibrium seem to be an important determinant of the variability of the observed decisions around the theoretical equilibrium.

Pages: 34 pages
Date: 1988
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Journal Article: Experimental Tests of Ricardian Equivalence (1991)
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