We test the predictions of the theoretical literature initiated by the study of Domar and Musgrave (1944) with a laboratory experiment in which subjects have to decide on the composition of an asset portfolio. Our simple design enables us to distinguish between Real Tax Effects and Perception...

In this paper, we quantitatively assess the welfare implications of alternative public education spending rules. To this end, we employ a dynamic stochastic general equilibrium model in which human capital externalities and public education expenditures, financed by distorting taxes, enhance the...