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Tax Ratios in Macroeconomics: Do Taxes Really Matter?

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  • Bjørn Volkerink
  • Jan-Egbert Sturm
  • Jakob de Haan

Abstract

In various empirical studies so-called tax ratios (tax revenues expressed as a ratio of some aggregate tax base) are employed as approximations for tax burdens. The most difficult problem in calculating tax ratios is the way in which personal income tax revenues are attributed to labor and capital. We argue that the methodology of Mendoza et al. (1994) is seriously flawed in this respect. Using information from national sources, we calculate more accurate tax ratios for eight OECD countries that differ substantially from those of Mendoza et al. (1997) and which are also differently related to various economic variables.
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  • Bjørn Volkerink & Jan-Egbert Sturm & Jakob de Haan, 2002. "Tax Ratios in Macroeconomics: Do Taxes Really Matter?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 29(3), pages 209-224, September.
    • Handle: RePEc:kap:empiri:v:29:y:2002:i:3:p:209-224
    DOI: 10.1023/A:1020251725916
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    1. Razin, Assaf & Sadka, Efraim & Swagel, Phillip, 2002. "Tax burden and migration: a political economy theory and evidence," Journal of Public Economics, Elsevier, vol. 85(2), pages 167-190, August.
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    2. Nazila Alinaghi & W. Robert Reed, 2021. "Taxes and Economic Growth in OECD Countries: A Meta-analysis," Public Finance Review, , vol. 49(1), pages 3-40, January.
    3. Dreher, Axel, 2006. "The influence of globalization on taxes and social policy: An empirical analysis for OECD countries," European Journal of Political Economy, Elsevier, vol. 22(1), pages 179-201, March.
    4. Cyntia Freitas Azevedo & Angelo Marsiglia Fasolo, 2015. "Effective Tax Rates on Consumption and Factor Incomes: a quarterly frequency estimation for Brazil," Working Papers Series 398, Central Bank of Brazil, Research Department.
    5. International Monetary Fund, 2004. "Austria: Selected Issues," IMF Staff Country Reports 2004/237, International Monetary Fund.
    6. Michael P. Devereux & Simon Loretz, 2013. "What Do We Know About Corporate Tax Competition?," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(3), pages 745-774, September.
    7. Jaime Turrion & Carmela Martin, 2003. "Eastern Enlargement of the European Union and Foreign Direct Investment Adjustments," European Economy Group Working Papers 24, European Economy Group.
    8. Sourafel Girma, 2005. "Absorptive Capacity and Productivity Spillovers from FDI: A Threshold Regression Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 281-306, June.
    9. Kostarakos, Ilias & Varthalitis, Petros, 2020. "Effective tax rates in Ireland," Research Series, Economic and Social Research Institute (ESRI), number RS110, June.
    10. Lloyd-Braga, Teresa & Modesto, Leonor & Seegmuller, Thomas, 2014. "Market distortions and local indeterminacy: A general approach," Journal of Economic Theory, Elsevier, vol. 151(C), pages 216-247.
    11. Jorge Crespo & Carmela Martin & Francisco Javier Velázquez, 2002. "International technology diffusion through imports and its impact on economic growth," European Economy Group Working Papers 12, European Economy Group.
    12. Murat Üngör, 2014. "Average effective tax rates on consumption for Turkey: New data and a comparative analysis," Economics Bulletin, AccessEcon, vol. 34(1), pages 567-580.
    13. Greenaway, David & Foster, Neil, 2002. "North-South Trade, Knowledge Spillovers and Growth," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 17, pages 650-670.
    14. Thomas Goda & Sebastián Ballesteros,, 2020. "The impact of effective corporate tax rates on investment," Documentos de Trabajo de Valor Público 18212, Universidad EAFIT.
    15. Horst Feldmann, 2006. "Government Size and Unemployment: Evidence from Industrial Countries," Public Choice, Springer, vol. 127(3), pages 443-459, June.

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