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Tax Structure and Growth: Are Some Taxes Better Than Others?

Abstract

Using pooled cross-sectional data from 23 OECD countries, between1965 and 1990, I find evidence that the tax structure affectseconomic growth. Specifically, the proportion of tax revenueraised by taxing personal income has a negative correlation witheconomic growth. This result is robust to a rigorous sensitivityanalysis, where I control for other plausible growth determinantsin a systematic manner. Also, there is some empirical evidencethat tax progressivity, measured in terms of the long-run incomeelasticity of tax revenue, is associated with low economicgrowth.

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Widmalm, F. Tax Structure and Growth: Are Some Taxes Better Than Others?. Public Choice 107, 199–219 (2001). https://doi.org/10.1023/A:1010340017288

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Keywords

  • Negative Correlation
  • Public Finance
  • OECD Country
  • Personal Income