The Role of Beliefs for the Sustainability of the Fiscal Constitution

Karl Justus Bernhard Neumärker and Gerald Pech ()

No 2003-01, CSLE Discussion Paper Series from Saarland University, CSLE - Center for the Study of Law and Economics

Abstract: Why does the government not defect from the constitution? This article focuses on the dynamic restraints the government faces under the rule of law: violations against unconstitutional laws are not punished under the constitution. If a violating government cannot commit itself never to reinstall the constitution enforcing an unconstitutional law becomes difficult. Citizens? expectations to go unpunished when not complying may be self-fulfilling. Deriving the equilibrium of a global game we show that this mechanism is effectively deterring a government from defecting from a constitutionally permissible tax rate.

Keywords: tax evasion; global games; selffulfilling expectations; dynamic policy restraints (search for similar items in EconPapers)
JEL-codes: D7 E61 H26 K42 (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:csledp:200301

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