IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Taxation and economic growth

  • Gareth Myles

    ()

    (Institute for Fiscal Studies and University of Exeter)

The development of endogenous growth theory has opened an avenue through which the effects of taxation on economic growth can be explored. Explicit modelling of the individual decisions that contribute to growth allows the analysis of tax incidence and the prediction of growth effects. This paper reviews the theoretical and empirical evidence to assess whether a consensus arises as to how taxation affects the rate of economic growth. It is shown that the theoretical models isolate a number of channels through which taxation can affect growth and that these effects may be very substantial. Although empirical tests of the growth effect face unresolved difficulties, the empirical evidence points very strongly to the conclusion that the tax effect is very weak.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ifs.org.uk/fs/articles/0105a.pdf
Download Restriction: no

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 21 (2000)
Issue (Month): 1 (March)
Pages: 141-168

as
in new window

Handle: RePEc:ifs:fistud:v:21:y:2000:i:1:p:141-168
Contact details of provider: Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE
Phone: (+44) 020 7291 4800
Fax: (+44) 020 7323 4780
Web page: http://www.ifs.org.uk
Email:


More information through EDIRC

Order Information: Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE
Email:


References listed on IDEAS
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.:

as in new window
  1. Burbidge, John B, 1983. "Government Debt in an Overlapping-Generations Model with Bequests and Gifts," American Economic Review, American Economic Association, vol. 73(1), pages 222-27, March.
  2. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. repec:cup:cbooks:9780521497695 is not listed on IDEAS
  4. Asea, Patrick & Mendoza, Enrique G & Milesi-Ferretti, Gian Maria, 1996. "On the Ineffectiveness of Tax Policy in Altering Long- Run Growth: Harberger's Superneutrality Conjecture," CEPR Discussion Papers 1378, C.E.P.R. Discussion Papers.
  5. Zhu, Xiaodong, 1992. "Optimal fiscal policy in a stochastic growth model," Journal of Economic Theory, Elsevier, vol. 58(2), pages 250-289, December.
  6. Ohlsson, H. & Agell, J. & Lindh, T., 1995. "Growth and the Public Sector: A Critical Review Essay," Papers 1995-09, Uppsala - Working Paper Series.
  7. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  8. V. V. Chari & Patrick J. Kehoe, 1998. "Optimal fiscal and monetary policy," Staff Report 251, Federal Reserve Bank of Minneapolis.
  9. Bertola, Giuseppe, 1996. "Factor shares in OLG models of growth," European Economic Review, Elsevier, vol. 40(8), pages 1541-1560, November.
  10. Mabey, Nick & Nixon, James, 1997. "Are environmental taxes a free lunch? Issues in modelling the macroeconomic effects of carbon taxes," Energy Economics, Elsevier, vol. 19(1), pages 29-56, March.
  11. Easterly, William & DEC, 1993. "How much do distortions affect growth?," Policy Research Working Paper Series 1215, The World Bank.
  12. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  13. Patrick K. Asea & Stephen J. Turnovsky, 1997. "Capital Income Taxation and Risk-Taking in a Small Open Economy," NBER Working Papers 6189, National Bureau of Economic Research, Inc.
  14. Eric M. Engen & Jonathan Skinner, 1996. "Taxation and Economic Growth," NBER Working Papers 5826, National Bureau of Economic Research, Inc.
  15. Robert G. King & Sergio Rebelo, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," NBER Working Papers 3338, National Bureau of Economic Research, Inc.
  16. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-50, June.
  17. Folster, Stefan & Henrekson, Magnus, 1999. "Growth and the public sector: a critique of the critics," European Journal of Political Economy, Elsevier, vol. 15(2), pages 337-358, June.
  18. Koester, Reinhard B & Kormendi, Roger C, 1989. "Taxation, Aggregate Activity and Economic Growth: Cross-Country Evidence on Some Supply-Side Hypotheses," Economic Inquiry, Western Economic Association International, vol. 27(3), pages 367-86, July.
  19. Lans Bovenberg, A. & de Mooij, Ruud A., 1997. "Environmental tax reform and endogenous growth," Journal of Public Economics, Elsevier, vol. 63(2), pages 207-237, January.
  20. Einarsson, T. & Marquis, M.H., 1997. "Fiscal Policy Analysis under Alternative Mechanisms of Endogenous Growth," Working Papers 1997_01_01, Department of Economics, Florida State University.
  21. Sheshinski, Eytan & Green, Jerry, 1976. "Direct Versus Indirect Remedies for Externalities," Scholarly Articles 3204666, Harvard University Department of Economics.
  22. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  23. Razin, Assaf & Yuen, Chi-Wa, 1996. "Capital income taxation and long-run growth: New perspectives," Journal of Public Economics, Elsevier, vol. 59(2), pages 239-263, February.
  24. Atkinson, A B & Sandmo, A, 1980. "Welfare Implications of the Taxation of Savings," Economic Journal, Royal Economic Society, vol. 90(359), pages 529-49, September.
  25. Pecorino, Paul, 1993. "Tax structure and growth in a model with human capital," Journal of Public Economics, Elsevier, vol. 52(2), pages 251-271, September.
  26. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  27. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  28. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  29. Plosser, Charles I., 1992. "The search for growth," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 57-86.
  30. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
  31. Laitner, John, 1995. "Quantitative Evaluations of Efficient Tax Policies for Lucas' Supply Side Models," Oxford Economic Papers, Oxford University Press, vol. 47(3), pages 471-92, July.
  32. Uhlig, Harald & Yanagawa, Noriyuki, 1996. "Increasing the capital income tax may lead to faster growth," European Economic Review, Elsevier, vol. 40(8), pages 1521-1540, November.
  33. Raymond Gradus & Sjak Smulders, 1993. "The trade-off between environmental care and long-term growth—Pollution in three prototype growth models," Journal of Economics, Springer, vol. 58(1), pages 25-51, February.
  34. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  35. Joel Slemrod, 1995. "Involvement, Prosperity, and Economic Growth?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 373-431.
  36. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  37. Correia, Isabel H., 1996. "Should capital income be taxed in the steady state?," Journal of Public Economics, Elsevier, vol. 60(1), pages 147-151, April.
  38. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ifs:fistud:v:21:y:2000:i:1:p:141-168. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephanie Seavers)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.