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The Robust Relationship Between Taxes and State Economic Growth

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Author Info
W. Robert Reed () (University of Canterbury)

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Abstract

I estimate the relationship between taxes and economic growth using data from 1970-1999 and the forty-eight continental U.S. states. I find that taxes used to fund general expenditures are associated with significant, negative effects on economic growth. Further, this finding is robust across (i) alternative variable specifications, (ii) alternative estimation procedures, (iii) alternative ways of dividing the data into ¡°five-year¡± periods, and (iv) allowing for individual-specific time and state effects. I also provide an explanation for why previous research has had difficulty identifying this ¡°robust¡± relationship.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0613.pdf
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Publisher Info
Paper provided by University of Canterbury, Department of Economics in its series Working Papers in Economics with number 06/13.

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Length: 40 pages
Date of creation: 25 Nov 2006
Date of revision:
Handle: RePEc:cbt:econwp:06/13

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Related research
Keywords: U.S. states; Economic development; Economic growth; Fiscal policy; Taxes; Tax burden; Panel data;

Find related papers by JEL classification:
H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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    Other versions:
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  3. Mofidi, Alaeddin & Stone, Joe A, 1990. "Do State and Local Taxes Affect Economic Growth?," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 686-91, November. [Downloadable!] (restricted)
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  15. Gasper A. Garofalo & Steven Yamarik, 2002. "Regional Convergence: Evidence From A New State-By-State Capital Stock Series," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 316-323, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. António Afonso & Juan González Alegre, 2007. "Economic Growth and Budgetary Components: a Panel Assessment for the EU," Working Papers 2007/29, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
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