search query: @indexterm rational expectations / total: 97
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| Author: | Swenson, C. W. |
| Title: | Rational expectations and tax policy: Experimental market evidence |
| Journal: | Journal of Economic Behavior and Organization
1997 : MAR, VOL. 32:3, p. 433-455 |
| Index terms: | TAX POLICY CONSUMPTION RATIONAL EXPECTATIONS |
| Language: | eng |
| Abstract: | This article examines whether subjects' forecasts of changing tax policy exhibit rational expectations (RE), and whether their intertemporal purchasing or consumption decisions reflect their anticipation of tax policy. The experiments found that subjects' forecasts didn't statistically conform to RE. Subjects followed a weaker form of RE by gradually becoming aware of the qualitative law of motion of fiscal policy. This enabled them to maximise tax benefits in a setting where prices were fixed and supply was certain. Individuals may be able to understand tax policy and preempt it by shifting activities to tax-favored periods. |
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