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Tax Policy for Economic Recovery and Growth

  • Jens Matthias Arnold
  • Bert Brys
  • Christopher Heady
  • Åsa Johansson
  • Cyrille Schwellnus
  • Laura Vartia

This article identifies tax policy that both speeds recovery from the current economic crisis and contributes to long-run growth. This is a challenge because short‐term recovery requires increases in demand while long‐term growth requires increases in supply. As short‐term tax concessions can be hard to reverse, this implies that policies to alleviate the crisis could compromise long‐run growth. The analysis makes use of recent evidence on the impact of tax structure on economic growth to identify which growth‐enhancing tax changes can also aid recovery, taking account of the need to protect those on low incomes.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 121 (2011)
Issue (Month): 550 (February)
Pages: F59-F80

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Handle: RePEc:ecj:econjl:v:121:y:2011:i:550:p:f59-f80
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  1. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer, vol. 10(2), pages 107-26, March.
  2. Rachel Griffith & Stephen Redding & Helen Simpson, 2004. "Foreign ownership and productivity: new evidence from the service sector and the R&D lab," IFS Working Papers W04/22, Institute for Fiscal Studies.
  3. Richard Blundell, 2009. "Assessing the Temporary VAT Cut Policy in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 30(1), pages 31-38, 03.
  4. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
  5. Stefano Scarpetta & Thierry Tressel, 2002. "Productivity and Convergence in a Panel of OECD Industries: Do Regulations and Institutions Matter?," OECD Economics Department Working Papers 342, OECD Publishing.
  6. Jens Arnold & Cyrille Schwellnus, 2008. "Do Corporate Taxes Reduce Productivity and Investment at the Firm Level? Cross-Country Evidence from the Amadeus Dataset," Working Papers 2008-19, CEPII research center.
  7. Ray Barrell & Martin Weale, 2009. "The Economics of a Reduction in VAT," Fiscal Studies, Institute for Fiscal Studies, vol. 30(1), pages 17-30, 03.
  8. Dana Hajkova & Giuseppe Nicoletti & Laura Vartia & Kwang-Yeol Yoo, 2006. "Taxation and business environment as drivers of foreign direct investment in OECD countries," OECD Economic Studies, OECD Publishing, vol. 2006(2), pages 7-38.
  9. Jens Arnold & Andrea Bassanini & Stefano Scarpetta, 2007. "Solow or Lucas?: Testing Growth Models Using Panel Data from OECD Countries," OECD Economics Department Working Papers 592, OECD Publishing.
  10. Jens Arnold, 2008. "Do Tax Structures Affect Aggregate Economic Growth?: Empirical Evidence from a Panel of OECD Countries," OECD Economics Department Working Papers 643, OECD Publishing.
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