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Tax structure and macroeconomic performance

Author

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  • Giampaolo Arachi
  • Valeria Bucci

    ()

  • Alessandra Casarico

Abstract

This paper reassesses the relationship between tax structure and long-run income, using as indicators of tax structure both a new series of implicit tax rates based on Mendoza et al. (J Public Econ 66:99–126, 1997 ) and tax ratios, adopting a dynamic panel estimation strategy, and explicitly accounting for cross-sectional dependence in the panel. When implicit tax rates are used, the paper shows that the link between tax structure and long-run income per capita is not robust to the adoption of different assumptions on observable and unobservable heterogeneity across countries. When tax ratios are used, there is some evidence of a negative impact of labour taxation on long-run income, but this result is shown to capture non-fiscal effects coming from the evolution of the labour share. Turning to the short run, the research presented here finds strong evidence of a positive effect on per capita income of a tax shift from labour and capital taxation towards consumption taxation, which provides support for fiscal devaluations. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Giampaolo Arachi & Valeria Bucci & Alessandra Casarico, 2015. "Tax structure and macroeconomic performance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(4), pages 635-662, August.
  • Handle: RePEc:kap:itaxpf:v:22:y:2015:i:4:p:635-662
    DOI: 10.1007/s10797-015-9364-1
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Donatella Baiardi & Paola Profeta & Riccardo Puglisi & Simona Scabrosetti, 2019. "Tax policy and economic growth: does it really matter?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(2), pages 282-316, April.
    2. repec:bla:ecinqu:v:56:y:2018:i:2:p:1136-1148 is not listed on IDEAS
    3. Strohner, Ludwig & Berger, Johannes & Thomas, Tobias, 2018. "Sekt oder Selters? Ökonomische Folgen der Reformzurückhaltung bei der Beendigung des Solidaritätszuschlags," DICE Ordnungspolitische Perspektiven 98, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Minniti, Antonio & Venturini, Francesco, 2017. "The long-run growth effects of R&D policy," Research Policy, Elsevier, vol. 46(1), pages 316-326.
    5. Gbato, Andre, 2017. "Impact of taxation on growth in Subsaharan Africa: new evidence based on a new data set," MPRA Paper 80903, University Library of Munich, Germany.
    6. repec:liu:liucej:v:14:y:2017:i:2:p:265-301 is not listed on IDEAS
    7. Colin Davis & Ken‐ichi Hashimoto, 2018. "Corporate Tax Policy And Industry Location With Fully Endogenous Productivity Growth," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1136-1148, April.
    8. repec:spr:italej:v:3:y:2017:i:2:d:10.1007_s40797-017-0056-0 is not listed on IDEAS

    More about this item

    Keywords

    Long-run income; Tax structure; Fiscal devaluation ; Cross-sectional dependence; E62; H30; O43;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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