Abstract

http://ssrn.com/abstract=2164597
 
 

Citations (3)



 


 



Non-Linear Effects of Taxation on Growth


Nir Jaimovich


Duke University

Sergio T. Rebelo


Northwestern University - Kellogg School of Management; Centre for Economic Policy Research (CEPR); University of Rochester - Department of Economics; National Bureau of Economic Research (NBER)

October 2012

NBER Working Paper No. w18473

Abstract:     
We propose a model consistent with two observations. First, the tax rates adopted by different countries are generally uncorrelated with their growth performance. Second, countries that drastically reduce private incentives to invest, severely hurt their growth performance. In our model, the effects of taxation on growth are highly non-linear. Low or moderate tax rates have a very small impact on long-run growth rates. But as tax rates rise, their negative impact on growth rises dramatically. The median voter chooses tax rates that have a small impact on growth prospects, making the relation between tax rates and economic growth difficult to measure empirically.

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Number of Pages in PDF File: 38

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Date posted: October 20, 2012  

Suggested Citation

Jaimovich, Nir and Rebelo, Sergio T., Non-Linear Effects of Taxation on Growth (October 2012). NBER Working Paper No. w18473. Available at SSRN: http://ssrn.com/abstract=2164597

Contact Information

Nir Jaimovich (Contact Author)
Duke University ( email )
100 Fuqua Drive
Durham, NC 27708-0204
United States
Sergio Tavares Rebelo
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Leverone Hall
Evanston, IL 60208
United States
847-467-2329 (Phone)
847-491-5719 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
University of Rochester - Department of Economics ( email )
Harkness Hall
Rochester, NY 14627
United States
585-275-5252 (Phone)
585-256-2309 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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