Harberger’s superneutrality conjecture contends that, although in theory the mix of direct and indirect taxes affects investment and growth, in practice tax policy is ineffective as an instrument to promote growth. This paper provides evidence to support this view by examining the predictions of endogenous growth models driven by human capital accumulation. The empirical work is based on numerical simulations and cross-country regressions, using a new methodology for constructing aggregate effective tax rates. Results show significant investment effects from taxes that are consistent with negligible growth effects. The results are robust to the introduction of other growth determinants.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1378.
Find related papers by JEL classification: E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
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