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Tax, Regulation and Economic Growth: A Case Study of the UK

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  • Minford, Lucy

Abstract

This paper investigates the causal relationship between government policy and UK output and productivity growth between 1970 and 2009. In an open economy DSGE model of the UK, productivity growth is determined by the tax and regulatory environment in which firms operate. Identification is assured for the DSGE model; therefore the direction of causality is unambiguously from policy to productivity. The model is estimated and tested using simulation-based econometric methods (indirect inference). The results offer robust empirical evidence that temporary changes in policies underpinning the business environment can have long-lasting effects on economic growth.

Suggested Citation

  • Minford, Lucy, 2015. "Tax, Regulation and Economic Growth: A Case Study of the UK," Cardiff Economics Working Papers E2015/16, Cardiff University, Cardiff Business School, Economics Section, revised Jun 2016.
  • Handle: RePEc:cdf:wpaper:2015/16
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    References listed on IDEAS

    as
    1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, Oxford University Press, pages 1-37.
    2. repec:hrv:faseco:30747190 is not listed on IDEAS
    3. Vo Le & Kent Matthews & David Meenagh & Patrick Minford & Zhiguo Xiao, 2014. "Banking and the Macroeconomy in China: A Banking Crisis Deferred?," Open Economies Review, Springer, pages 123-161.
    4. Le, Vo Phuong Mai & Meenagh, David & Minford, Patrick & Wickens, Michael, 2011. "How much nominal rigidity is there in the US economy? Testing a new Keynesian DSGE model using indirect inference," Journal of Economic Dynamics and Control, Elsevier, pages 2078-2104.
    5. Gregory DeFreitas & Adriana Marshall, 1998. "Labour Surplus, Worker Rights and Productivity Growth: A Comparative Analysis of Asia and Latin America," LABOUR, CEIS, vol. 12(3), pages 515-539, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Economic growth; government policy; country studies; indirect inference;

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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