The Impact of Fiscal Illusion on Housing Values: An Australian Test of the Debt Illusion Hypothesis
(1995) The Impact of Fiscal Illusion on Housing Values: An Australian Test of the Debt Illusion Hypothesis. Public Budgeting and Finance 15(3):pp. 63-73.
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Abstract
The debt illusion hypothesis holds that taxpayers may underestimate the present discounted value of future tax liabilities under debt finance. The empirical question arises as to whether debt illusion at the local government level can affect housing values. This proposition is evaluated by investigating whether local fiscal variables are fully capitalised into housing values by means of a pooled time-series, cross-sectional analysis of 27 metropolitan municipalities in Sydney, Australia, for the period 1989 to 1991. The results indicate that municipal debt is under-capitalised into housing values, and accordingly suggests that local government expenditure may be systematically biased upwards.
| Item Type: | Journal Article |
|---|---|
| Status: | Published |
| Keywords: | Fiscal illusion; debt illusion; taxation; local government |
| Subjects: | 360000 Policy and Political Science > 360100 Political Science > 360103 Federalism and Intergovernmental Relations 340000 Economics > 340200 Applied Economics > 340209 Public Sector Economics 360000 Policy and Political Science > 360200 Policy and Administration > 360201 Public Policy 350000 Commerce, Management, Tourism and Services > 350300 Banking, Finance and Investment > 350399 Banking, Finance and Investment not elsewhere classified |
| ID Code: | 2792 |
| Deposited By: | Worthington, Andrew |
| Deposited On: | 05 December 2005 |
| Alternative Locations: | http://dx.doi.org/10.1111/1540-5850.01047 |
| Copyright Owner: | Copyright 1995 Blackwell Publishing |
| Copyright Statement: | The definitive version is available at www.blackwell-synergy.com |