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Taxation, Aggregate Activity and Economic Growth: Further Cross-country Evidence on Some Supply-Side Hypotheses

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  • Garrison, Charles B
  • Lee, Feng-Yao

Abstract

This paper investigates the effect of marginal tax rates on the level of economic activity. Data from sixty-three countries for the period 1970-84 provide support for Reinhard B. Koester and Roger C. Kormendi's (1989) method of estimating marginal tax rates for individual countries. However, their conclusion that increases in marginal tax rates have negative effects on the level of economic activity is not robust when the authors extend the time period from 1970-79 to 1970-84. Further, even for Koester and Kormendi's own data set, the negative relation does not hold when the sample is disaggregated into industrial countries and low-income countries. Copyright 1992 by Oxford University Press.

Suggested Citation

  • Garrison, Charles B & Lee, Feng-Yao, 1992. "Taxation, Aggregate Activity and Economic Growth: Further Cross-country Evidence on Some Supply-Side Hypotheses," Economic Inquiry, Western Economic Association International, vol. 30(1), pages 172-176, January.
    • Handle: RePEc:oup:ecinqu:v:30:y:1992:i:1:p:172-76
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    Cited by:

    1. Pressman, Steven, 2005. "Income guarantees and the equity-efficiency tradeoff," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 34(1), pages 83-100, February.
    2. Peter N. Ireland, 1994. "Two perspectives on growth and taxes," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 1-18.
    3. Padovano, Fabio & Galli, Emma, 2002. "Comparing the growth effects of marginal vs. average tax rates and progressivity," European Journal of Political Economy, Elsevier, vol. 18(3), pages 529-544, September.
    4. Lee, Young & Gordon, Roger H., 2005. "Tax structure and economic growth," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1027-1043, June.
    5. William Gale & Peter Orszag, 2005. "Economic Effects of Making the 2001 and 2003 Tax Cuts Permanent," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(2), pages 193-232, March.
    6. Margit Schratzenstaller, 2006. "Teilstudie 12: Wachstumsimpulse durch die öffentliche Hand," WIFO Studies, WIFO, number 27451.

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