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Tax policy and economic growth: does it really matter?

Author

Listed:
  • Donatella Baiardi

    (University of Parma)

  • Paola Profeta

    (Bocconi University
    DONDENA Centre, Bocconi University)

  • Riccardo Puglisi

    (University of Pavia)

  • Simona Scabrosetti

    (DONDENA Centre, Bocconi University
    University of Pavia)

Abstract

We study the relationship between per capita GDP, overall tax revenue and tax composition. We find that there is some evidence of a negative and statistically significant relationship between tax revenue and economic growth, while there are no robust relationships between revenue-neutral tax shifts and economic growth. The results hold in different samples of OECD countries for different time periods. We also identify different relationships between the short run and long run. Overall, our results cast doubts on the potential growth enhancing effects of a shift from direct to indirect taxation, with paramount consequences on tax policy.

Suggested Citation

  • Donatella Baiardi & Paola Profeta & Riccardo Puglisi & Simona Scabrosetti, 2019. "Tax policy and economic growth: does it really matter?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(2), pages 282-316, April.
    • Handle: RePEc:kap:itaxpf:v:26:y:2019:i:2:d:10.1007_s10797-018-9494-3
    DOI: 10.1007/s10797-018-9494-3
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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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