Built-in flexibility of taxation and stability when tax liabilities respond with a time lag .2. Reply
Citation:D.J. Smyth, 'Built-in flexibility of taxation and stability when tax liabilities respond with a time lag .2. Reply', [Letter], Economic and Social Research Institute, Economic and Social Review, Vol.7 (Issue 4), 1976, 1976, pp419-422
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In my earlier paper (Smyth, 1975b) I combined a distributed lag or permanent income consumption function with a lagged tax function. Bradley (1976) disputes my finding that short, two-period, oscillations may result and that consequently the presence of built-in flexibility of taxation may be destabilising rather than stabilising. Bradley reaches his conclusion by limiting consideration to parameter values that he regards as plausible. I shall demonstrate that there is empirical evidence that conflicts with that advanced by Bradley, evidence that gives parameter values consistent with oscillations and destabilisation.
Author: Smyth, D.J.
Publisher:Economic and Social Research Institute
Type of material:Letter
Series/Report no:Economic and Social Review
Vol.7 (Issue 4), 1976
Availability:Full text available