Crowding-Out Hypothesis Versus Ricardian Equivalence Proposition: Evidence from Literature

Eskisehir Osmangazi University Journal of Social Sciences, Vol. 4, No. 2, pp. 21-35, December 2003

15 Pages Posted: 13 Jul 2004

See all articles by Erdal Gumus

Erdal Gumus

Eskisehir Osmangazi University - Department of Public Finance

Abstract

The size of government expenditure in an economy grows over time. To finance these expenditures, public incomes must grow as well. Given that tax revenues are not sufficient for such spending and levying, new taxes and/or increasing current tax rates are not politically desirable, the only option left is to borrow. The purpose of this paper is to survey the two most important approaches, "crowding-out hypothesis" and "Ricardian Equivalence proposition", in the literature, and evaluate the economic consequences of public borrowing.

Keywords: Crowding-out, crowding-in, Ricardian equivalence, government expenditure, public borrowing

JEL Classification: H5, H6

Suggested Citation

Gumus, Erdal, Crowding-Out Hypothesis Versus Ricardian Equivalence Proposition: Evidence from Literature. Eskisehir Osmangazi University Journal of Social Sciences, Vol. 4, No. 2, pp. 21-35, December 2003, Available at SSRN: https://ssrn.com/abstract=533142

Erdal Gumus (Contact Author)

Eskisehir Osmangazi University - Department of Public Finance ( email )

Meselik Campus
Eskisehir, 26480
Turkey
+222 239 37 50/1751 (Phone)

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