This paper analyzes the effects of budget deficits on consumption when individual taxes are stochastic. It is shown that the co-movements between budget deficits and private consumption will depend on how risk averse individuals are. In the case of lump-sum taxes, it is sufficient to assume that...

The paper analyzes the effects on consumption from changes in the riskiness of taxes. It starts by reinterpreting the Sandmo [1970] paper on general capital income risk to the case of risky capital taxation. In his framework the concept of a mean preserving spread (MPS) is used for the risk...

The Ricardian equivalence theorem has been widely debated since (at least) the seventies. The theorem states that households should not change their consumption path in response to changed timing of taxes, given the path of government consumption. In the paper, theoretical models giving rise to...