IDEAS home Printed from
   My bibliography  Save this article

The Relationship between Tax Revenues and Government Expenditures in European Union and Non-European Union OECD Countries


  • Oluwole Owoye

    (Western Connecticut State University, Danbury, CT, USA,

  • Olugbenga A. Onafowora

    (Susquehanna University, Selinsgrove, PA, USA)


This article examines the causal relationship between tax revenues and government expenditures in twenty-two OECD countries, eleven European Union (EU) member states, and eleven non-EU. We use the Autorgressive Distributed Lag (ARDL) bounds test and the Toda-Yamamoto Granger noncausality approach to test for causality. The results show that the long-run and short-run causal patterns differ across these groups within the Organisation for Economic Co-operation and Development (OECD). For the long-run causal patterns, we find evidence to confirm the tax-and-spend hypothesis in eight of the twenty-two countries; but the evidence is more prevalent within the EU countries, where tax burdens are much higher, than in the non-EU OECD countries. In addition, the long-run causality results also confirm the institutional separation hypothesis in twelve countries, with two-thirds coming from the non-EU OECD countries. While we have no evidence to support the fiscal synchronization hypothesis in the long run, the short-run results show evidence of fiscal synchronization in five out of twenty-two countries.

Suggested Citation

  • Oluwole Owoye & Olugbenga A. Onafowora, 2011. "The Relationship between Tax Revenues and Government Expenditures in European Union and Non-European Union OECD Countries," Public Finance Review, , vol. 39(3), pages 429-461, May.
  • Handle: RePEc:sae:pubfin:v:39:y:2011:i:3:p:429-461

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Trachanas, Emmanouil & Katrakilidis, Constantinos, 2013. "Fiscal deficits under financial pressure and insolvency: Evidence for Italy, Greece and Spain," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 730-749.
    2. Kollias, Christos & Papadamou, Stephanos & Psarianos, Iacovos, 2014. "Fiscal imbalances and asymmetric adjustment under Labour and Conservative governments in the UK," Research in Economics, Elsevier, vol. 68(3), pages 208-213.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:39:y:2011:i:3:p:429-461. 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: (SAGE Publications). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.