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Demography and economic growth: the effect of tax composition

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  • Weijie Luo

Abstract

Several theories document the negative effect of population ageing on economic growth, either due to the smaller size of the labour force and consequent reduced productivity, or due to an excess of savings over desired investment. However, the evidence shows no such negative relationship. This paper argues that population ageing increases the demand for expenditure taxes rather than income taxes, leading to higher growth since the extent of distortionary relative to non-distortionary taxes falls and investment is facilitated. International panel evidence supports this hypothesis, and this relationship holds more firmly in stronger democracies.

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  • Weijie Luo, 2020. "Demography and economic growth: the effect of tax composition," Applied Economics Letters, Taylor & Francis Journals, vol. 27(20), pages 1629-1634, November.
    • Handle: RePEc:taf:apeclt:v:27:y:2020:i:20:p:1629-1634
    DOI: 10.1080/13504851.2019.1707761
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    Cited by:

    1. Gibogwe, Vincent & Nigo, Ayine & Kufuor, Karen, 2022. "FDI and economic growth in SADC region," MPRA Paper 115029, University Library of Munich, Germany, revised 29 Sep 2022.
    2. Stephen Taiwo Onifade & Abdul Qahar Khatir & Ahmet Ay & Murat Canitez, 2022. "Reviewing the Trade Openness, Domestic Investment, and Economic Growth Nexus: Contemporary Policy Implications for the MENA Region," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 14(2), pages 489-512, June.

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