Are Fiscal Illusions Real or Are They Just an Illusion? A
Review of Contemporary State of Art

D 2015

Are Fiscal Illusions Real or Are They Just an Illusion? A Review of Contemporary State of Art

MALÝ, Ivan

Basic information

Original name

Are Fiscal Illusions Real or Are They Just an Illusion? A Review of Contemporary State of Art

Name in Czech

Jsou fiskální iluze reálné nebo jde jen o iluzi? Přehled současného poznání.

Authors

MALÝ, Ivan (203 Czech Republic, guarantor, belonging to the institution)

Edition

Brno, Proceedings of the 19th International Conference Current Trends in Public Sector Research, p. 134-141, 8 pp. 2015

Publisher

Masarykova univerzita

Other information

Language

English

Type of outcome

Stať ve sborníku

Field of Study

50200 5.2 Economics and Business

Country of publisher

Czech Republic

Confidentiality degree

není předmětem státního či obchodního tajemství

Publication form

printed version "print"

RIV identification code

RIV/00216224:14560/15:00085128

Organization unit

Faculty of Economics and Administration

ISBN

978-80-210-7532-0

ISSN

UT WoS

000355547600016

Keywords (in Czech)

fiskální iluze; výdaje; teorie polštáře; byrokracie

Keywords in English

fiscal illusion; expenditures; slack theory; bureaucracy

Abstract

V originále

The paper addresses some difficulties in designing empirical research aiming to obtain an evidence of a real existence of Fiscal Illusions – the concept well known within a theoretical economic literature for more than a hundred years. There is an extensive literature trying to demonstrate empirically the presence (or absence) of fiscal illusion in the real world. The results are not convicting, according to a classical Oates study (1988) and it seems to be confirmed by our review of current papers dealing with this topic. The contemporary empirical literature includes numerous highly relevant, instructive, and comprehensive papers dealing with many facets of fiscal illusions. One aspect, however, seems to be omitted. Econometric studies comparing within sample of governmental institutions on the same level certain measures as explanatory variables (e.g. complexity of the tax system, the share of subsidies, etc.) with the amount of public budgets, and the dynamics of their growth are mainly used in order to indicate the fiscal illusion. In fact, fiscal illusions may be used/initiated not as an attempt to increase (annual) budget expenditures but rather because of a) avoidance of voters resistance against given taxation volume; b) to govern easier, with lover transaction costs (e.g. with less pressure to demonstrate effective use of public funds…). These measures are inherently difficult to quantify. We discuss possibilities to replace their direct measurement by using some auxiliary indicators, such as number of officials and/or public employees, the relative level of wages in the public sector, the relative proportion of certain types of expenditure, etc.

Links

MUNI/A/0784/2013, interní kód MU

Name: Vybrané aspekty hodnocení efektivnosti a zásluhovosti veřejných politik (Acronym: Aspekty VEPO)

Investor: Masaryk University, Category A

Citovat

MALÝ, Ivan. Are Fiscal Illusions Real or Are They Just an Illusion? A Review of Contemporary State of Art. In Dagmar Špalková, Lenka Matějová. Proceedings of the 19th International Conference Current Trends in Public Sector Research. Brno: Masarykova univerzita, 2015, p. 134-141. ISBN 978-80-210-7532-0.

@inproceedings{1320445,
   author = {Malý, Ivan},
   address = {Brno},
   booktitle = {Proceedings of the 19th International Conference Current Trends in Public Sector Research},
   editor = {Dagmar Špalková, Lenka Matějová},
   keywords = {fiscal illusion; expenditures; slack theory; bureaucracy},
   howpublished = {tištěná verze "print"},
   language = {eng},
   location = {Brno},
   isbn = {978-80-210-7532-0},
   pages = {134-141},
   publisher = {Masarykova univerzita},
   title = {Are Fiscal Illusions Real or Are They Just an Illusion? A Review of Contemporary State of Art},
   year = {2015}
}

TY  - JOUR
ID  - 1320445
AU  - Malý, Ivan
PY  - 2015
TI  - Are Fiscal Illusions Real or Are They Just an Illusion? A Review of Contemporary State of Art
PB  - Masarykova univerzita
CY  - Brno
SN  - 9788021075320
KW  - fiscal illusion
KW  - expenditures
KW  - slack theory
KW  - bureaucracy
N2  - The paper addresses some difficulties in designing empirical research aiming to obtain an evidence of a real existence of Fiscal Illusions – the concept well known within a theoretical economic literature for more than a hundred years. There is an extensive literature trying to demonstrate empirically the presence (or absence) of fiscal illusion in the real world. The results are not convicting, according to a classical Oates study (1988) and it seems to be confirmed by our review of current papers dealing with this topic. The contemporary empirical literature includes numerous highly relevant, instructive, and comprehensive papers dealing with many facets of fiscal illusions. One aspect, however, seems to be omitted. Econometric studies comparing within sample of governmental institutions on the same level certain measures as explanatory variables (e.g. complexity of the tax system, the share of subsidies, etc.) with the amount of public budgets, and the dynamics of their growth are mainly used in order to indicate the fiscal illusion. In fact, fiscal illusions may be used/initiated not as an attempt to increase (annual) budget expenditures but rather because of a) avoidance of voters resistance against given taxation volume; b) to govern easier, with lover transaction costs (e.g. with less pressure to demonstrate effective use of public funds…). These measures are inherently difficult to quantify. We discuss possibilities to replace their direct measurement by using some auxiliary indicators, such as number of officials and/or public employees, the relative level of wages in the public sector, the relative proportion of certain types of expenditure, etc.
ER  -

MALÝ, Ivan. Are Fiscal Illusions Real or Are They Just an Illusion? A Review of Contemporary State of Art. In Dagmar Špalková, Lenka Matějová. \textit{Proceedings of the 19th International Conference Current Trends in Public Sector Research}. Brno: Masarykova univerzita, 2015, p.~134-141. ISBN~978-80-210-7532-0.

Detailed Information on Publication Record