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A Tax-Based Test for Nominal Rigidities / James M. Poterba, Julio J. Rotemberg, Lawrence H. Summers.
- Format:
- Book
- Author/Creator:
- Poterba, James M.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w1627.
- NBER working paper series no. w1627
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1985.
- Summary:
- In classical macroeconomic models with flexible wages and prices,whether a tax is levied on producers or consumers does not affect its incidence. However, if wages or prices are rigid in the short run, as they are in Keynesian macroeconomic models, then shifting a tax from one side ofthe market to the other may have real effects. Tax changes therefore provide potential tests for the presence of nominal rigidities. This paper examines the price and output effects of revenue-neutral shifts between direct and indirect taxation. The results, based on post-war data from both Great Britain and the United States, reject the view that wages and prices are completely flexible in the short run.
- Notes:
- Print version record
- June 1985.
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