Towards a Fiscal Illusion Index

Mourão, Paulo (2007): Towards a Fiscal Illusion Index. Unpublished.

Abstract

This paper presents an index of Fiscal Illusion for 68 democratic countries from 1960 to 2006. The studied Fiscal Illusion is the one related to a wrong perception of the budget aggregates according to the voters and taxpayers’ perspectives. In the construction of the index, methodological issues were carefully taken into account. The results obtained reveal that fiscal illusion varies greatly around the world. Countries such as Mali, Pakistan, Russia and Sri Lanka have the highest average values over the time period considered; while Austria, Luxembourg, Netherlands and New Zealand have the lowest. Regarding the time dimension, between 1980 and 1995 there was a significant decrease in the average value of the index across countries, suggesting a reduction in the adoption of fiscal illusion measures during this period. After 1995, the index remained stable in most of the countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fiscal Illusion; Indexes/Indicators; Democracy
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation; H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology; Computer Programs > C82 - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General

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