This article examines how revenue structures, through fiscal illusion effects, influence government spending. It does so with a regression model in which public spending depends on the perceived price of public services and other demand variables. The authors construct a perceived price term...

The conventionally calculated Solow residual has been used as a measure of exogenous productivity shocks that contribute to the business cycle. However, recently this residual has been shown to be endogenous and has led to the conclusion that the aggregate economy is characterized by increasing...