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Fiscal Policy'S Influence On Economic Growth In The European Union

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  • MIHAIU Diana Marieta

    ("Lucian Blaga" University of Sibiu)

  • OPREANA Alin

    ("Lucian Blaga" University of Sibiu)

Abstract

In this paper we study the impact of the fiscal policy on the economic growth for European Union, for the period 2000-2009. This subject represents a very debated problem in the economic literature. Our findings shows that, from the analysis of correlation between economic growth rate and total rate of taxation, there is generally an inverse relationship, meaning that an increase in the tax rate adversely affects economic growth. Continuing the analysis of the correlation between economic growth rate and total tax rate components it can be seen that there is an inverse relationship between labor taxation and capital taxation and economic growth in EU Member States. Both labour and capital taxes are part of direct taxes, so we conclude that a rise in direct taxes will cause a reduction in real GDP growth rate. In contrast, between taxes on consumption and real GDP growth rate there is no significant correlation.

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Bibliographic Info

Article provided by Lucian Blaga University of Sibiu, Faculty of Economic Sciences in its journal Revista Economica.

Volume (Year): 64.6 (2012)
Issue (Month): 6 ()
Pages: 48-55

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Handle: RePEc:blg:reveco:v:64.6:y:2012:i:6:p:48-55

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Postal: Lucian Blaga University of Sibiu, Faculty of Economic Sciences Dumbravii Avenue, No.17, postal code 550324, Sibiu, Romania
Phone: 004 0269 210375
Fax: 004 0269 210375
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Web page: http://economice.ulbsibiu.ro/
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Keywords: fiscal policy; economic growth; taxes on labour; taxes on capital; taxes on consumption.;

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  1. Philip J. Grossman, 1988. "Government and Economic Growth: A Non-Linear Relationship," Monash Economics Working Papers archive-04, Monash University, Department of Economics.
  2. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
  3. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
  4. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  5. Oliviero A. Carboni & Giuseppe Medda, 2011. "Size And Composition Of Public Spending In A Neoclassical Growth Model," Metroeconomica, Wiley Blackwell, vol. 62(1), pages 150-170, 02.
  6. Holmes, James M & Hutton, Patricia A, 1990. "On the Causal Relationship between Government Expenditures and National Income," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 87-95, February.
  7. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Public Finance in Models of Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 645-61, October.
  8. Fölster, Stefan & Henrekson, Magnus, 1998. "Growth Effects of Government Expenditure and Taxation in Rich Countries," Working Paper Series 503, Research Institute of Industrial Economics, revised 20 Jun 2000.
  9. Robert J. Barro, 1991. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  10. Niloy Bose & M. Emranul Haque & Denise R. Osborn, 2007. "Public Expenditure And Economic Growth: A Disaggregated Analysis For Developing Countries," Manchester School, University of Manchester, vol. 75(5), pages 533-556, 09.
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