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Tax Policy and Economic Growth: Does It Really Matter?

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Listed:
  • Donatella Baiardi
  • Paola Profeta
  • Riccardo Puglisi
  • Simona Scabrosetti

Abstract

We challenge the “OECD view” (Arnold et al. 2011) according to which a shift from direct to indirect taxation is associated with higher long-run economic growth. We study the relationships between per capita GDP, overall tax revenue and tax composition (in particular direct vs. indirect taxation). We can replicate the findings in Arnold et al. when focusing on the same sample of countries and time period, but not when adopting more cautious estimates of the standard errors. The results are not robust to adding countries and/or extending the time period under consideration. They also differ in the short- and long-run.

Suggested Citation

  • Donatella Baiardi & Paola Profeta & Riccardo Puglisi & Simona Scabrosetti, 2017. "Tax Policy and Economic Growth: Does It Really Matter?," CESifo Working Paper Series 6343, CESifo.
    • Handle: RePEc:ces:ceswps:_6343
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    References listed on IDEAS

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    More about this item

    Keywords

    economic growth; taxation; tax mix; OECD countries;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • P50 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - General

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