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Taxation, Aggregate Activity and Economic Growth: Further Cross-country Evidence on Some Supply-Side Hypotheses


  • Garrison, Charles B
  • Lee, Feng-Yao


This paper investigates the effect of marginal tax rates on the level of economic activity. Data from sixty-three countries for the period 1970-84 provide support for Reinhard B. Koester and Roger C. Kormendi's (1989) method of estimating marginal tax rates for individual countries. However, their conclusion that increases in marginal tax rates have negative effects on the level of economic activity is not robust when the authors extend the time period from 1970-79 to 1970-84. Further, even for Koester and Kormendi's own data set, the negative relation does not hold when the sample is disaggregated into industrial countries and low-income countries. Copyright 1992 by Oxford University Press.

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  • Garrison, Charles B & Lee, Feng-Yao, 1992. "Taxation, Aggregate Activity and Economic Growth: Further Cross-country Evidence on Some Supply-Side Hypotheses," Economic Inquiry, Western Economic Association International, vol. 30(1), pages 172-176, January.
  • Handle: RePEc:oup:ecinqu:v:30:y:1992:i:1:p:172-76

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    References listed on IDEAS

    1. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 241-273, April.
    2. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-142, March.
    3. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
    4. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
    5. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    6. Allen, Bruce T, 1971. "Vertical Integration and Market Foreclosure: The Case of Cement and Concrete," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 251-274, April.
    7. Dodd, Peter, 1980. "Merger proposals, management discretion and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 8(2), pages 105-137, June.
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    Cited by:

    1. Lee, Young & Gordon, Roger H., 2005. "Tax structure and economic growth," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1027-1043, June.
    2. Pressman, Steven, 2005. "Income guarantees and the equity-efficiency tradeoff," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 34(1), pages 83-100, February.
    3. Padovano, Fabio & Galli, Emma, 2002. "Comparing the growth effects of marginal vs. average tax rates and progressivity," European Journal of Political Economy, Elsevier, vol. 18(3), pages 529-544, September.

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