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dc.contributor.authorvon Hagen, Jürgenen_US
dc.contributor.authorKube, Sebastianen_US
dc.contributor.authorKaiser, Johannesen_US
dc.contributor.authorSelten, Reinharden_US
dc.contributor.authorPope, Robinen_US
dc.description.abstractGovernment expenditure can be highly variable, if used as a countercyclical instrument, or as a response to economic crises or as a means of rapidly altering other features of the economy. An alternative policy setting is to keep government expenditure changes gradual and modest. It is shown that whether a more discretionary or a more stable usage of government expenditures better attains official sector macroeconomic goals is difficult to determine theoretically, in part because of missed risk effects. But the detecting which policy better meets the official sector macroeconomic goals from analysis of historical data or inter-country comparisons suffers from confounding events and institutions. This study offers a fresh insight from laboratory experiments. Our laboratory results favour gradualism in government expenditures, ie support the advocacy of more stable government expenditures offered in Friedman (1969), in Vernengo and Rochon (2000), and in the 2006 German tax change controversy, by that country?s local government sector.en_US
dc.relation.ispartofseriesBonn econ discussion papers 2006,26en_US
dc.subject.keywordshock therapyen_US
dc.subject.keyworddiscretionary or counter-cyclical government expenditureen_US
dc.subject.keywordlaboratory experimentsen_US
dc.titleThe Benefits of Gradualism in Government Expenditure Changes: Theory and Experimental Evidenceen_US
dc.typeWorking Paperen_US
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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