Tax and spend or spend and tax? Empirical evidence from Greece, Spain, Portugal and Ireland

The paper examines empirically the relationship between government it reven ues and expenditures in four European countries: Greece, Spain, Ireland, an d Portugal. In relative terms all four may be considered as the poorest mem bers of the European Union. Yet, they present a fairly diverse picture as f ar as their macroeconomic performance and fiscal position is concerned. The empirical findings from cointegration and causality tests that are reporte d here indicate that in the case of Greece and Ireland tax and spending dec isions are taken simultaneously by the fiscal authority, the tax-and-spend hypothesis is supported in the case of Spain, while absence of any causal o rdering between government expenditure and tax revenues has been establishe d for Portugal.