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Personal Income Tax and Economic Growth: A Comparative Study Between China and Pakistan

Author

Listed:
  • Azka Amin
  • Yan Chen
  • Shaoan Huang

Abstract

The present study explores the relationship between personal income tax and economic growth in China and Pakistan. For empirical analysis, bivariate and multivariate Granger causality frameworks have been utilized. The results do not support bivariate framework because it omit main variables. Then four important additional variables were introduced in multivariate framework to capture the country specific effect. The results under multivariate framework conclude there exist long-run positive unidirectional causality from personal income tax to real gross domestic product per capita (RGDPPC). The results showed that personal income tax, trade openness, inflation has positive while dependency ratio and agriculture has negative relation with economic growth for Pakistan while for China personal income tax, trade openness and agriculture sector has positive while inflation and dependency ratio shows negative relationship. Speed of adjustment predicts that system will move to equilibrium rapidly while diagnostic tests approve the perfectness of the model.

Suggested Citation

  • Azka Amin & Yan Chen & Shaoan Huang, 2018. "Personal Income Tax and Economic Growth: A Comparative Study Between China and Pakistan," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 6(1), pages 65-73.
    • Handle: RePEc:asi:ajemod:v:6:y:2018:i:1:p:65-73:id:302
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    Citations

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    Cited by:

    1. Temel Gurdal & Mucahit Aydin & Veysel Inal, 2021. "The relationship between tax revenue, government expenditure, and economic growth in G7 countries: new evidence from time and frequency domain approaches," Economic Change and Restructuring, Springer, vol. 54(2), pages 305-337, May.
    2. Dramane, Abdoulaye, 2022. "The Nexus between Military Spending, Tax Revenues and Economic Growth in the G5 Sahel Countries," African Journal of Economic Review, African Journal of Economic Review, vol. 10(2), March.
    3. Mkadmi, Jamel Eddine & Bakari, Sayef & Msai, Achwak, 2021. "Assessing the Impact of Tax Policies on Economic Growth in Tunisia: New Empirical and Policy Analysis," MPRA Paper 109023, University Library of Munich, Germany.

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