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International Tax and Public Finance

, Volume 26, Issue 2, pp 282–316 | Cite as

Tax policy and economic growth: does it really matter?

  • Donatella Baiardi
  • Paola Profeta
  • Riccardo Puglisi
  • Simona ScabrosettiEmail author
Article

Abstract

We study the relationship between per capita GDP, overall tax revenue and tax composition. We find that there is some evidence of a negative and statistically significant relationship between tax revenue and economic growth, while there are no robust relationships between revenue-neutral tax shifts and economic growth. The results hold in different samples of OECD countries for different time periods. We also identify different relationships between the short run and long run. Overall, our results cast doubts on the potential growth enhancing effects of a shift from direct to indirect taxation, with paramount consequences on tax policy.

Keywords

Economic growth Taxation Tax mix OECD countries 

JEL Classification

E62 H20 P50 

Notes

Acknowledgements

We thank Ethan Ilzetzki and seminar participants at the 2015 SIEP conference for useful comments. A special thanks to Jan Ditzen for help with his xtdcee2 Stata command. We also thank Massimo Bordignon, Carlo Cottarelli, Thomas Manfredi, Vito Tanzi, Stanley Winer for interesting suggestions, and Paolo Longo for research assistance in data collection.

Supplementary material

10797_2018_9494_MOESM1_ESM.docx (1.1 mb)
Supplementary material 1 (docx 1103 KB)

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of ParmaParmaItaly
  2. 2.Bocconi UniversityMilanItaly
  3. 3.DONDENA Centre, Bocconi UniversityMilanItaly
  4. 4.Department of Political and Social SciencesUniversity of PaviaPaviaItaly
  5. 5.Department of LawUniversity of PaviaPaviaItaly

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