NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Dynamic Scoring: Alternative Financing Schemes

Eric M. Leeper, Shu-Chun Susan Yang

NBER Working Paper No. 12103
Issued in March 2006
NBER Program(s):   EFG   PE

Neoclassical growth models predict that reductions in capital or labor tax rates are expansionary when lump-sum transfers are used to balance the government budget. This paper explores the consequences of bond-financed tax reductions that bring forth a range of possible offsetting policies, including future government consumption, capital tax rates, or labor tax rates. Through the resulting intertemporal distortions, current tax cuts can be contractionary. The paper also finds that more aggressive responses of offsetting policies to debt engender less debt accumulation and less costly tax cuts.

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This paper was revised on December 20, 2006

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Document Object Identifier (DOI): 10.3386/w12103

Published: Leeper, Eric M. & Yang, Shu-Chun Susan, 2008. "Dynamic scoring: Alternative financing schemes," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 159-182, February. citation courtesy of

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