What Does Ex-Post Evidence Tell Us About the Output Effects of Future Tax Reforms?

41 Pages Posted: 16 Apr 2011

See all articles by Florian Misch

Florian Misch

ZEW – Leibniz Centre for European Economic Research

Richard Kneller

University of Nottingham

Date Written: April 1, 2011

Abstract

This paper reviews the existing evidence on the effects of tax reforms on output levels and growth over the short and long run from different strands of the literature. It develops and applies criteria to evaluate the usefulness of ex-post estimates to predict the effects of tax reforms ex-ante. These include whether the estimated policy change can be replicated in practice and whether the estimates are reliable. Based on these criteria we present detailed tables summarizing and comparing ex-post estimates of the effects of tax reforms. Overall, our review suggests that at least the direction of the long-run growth effects can be predicted with a reasonable degree of certainty. However, our review also suggests that depending on the tax change, trade-offs between short-run stabilization and long-run growth may arise and that more research on this question is needed.

Keywords: Tax Reforms, Tax Policy, Aggregate Growth, Tax Multipliers, Fiscal Policy

JEL Classification: E62, H20, O20

Suggested Citation

Misch, Florian and Kneller, Richard, What Does Ex-Post Evidence Tell Us About the Output Effects of Future Tax Reforms? (April 1, 2011). ZEW - Centre for European Economic Research Discussion Paper No. 11-029. Available at SSRN: https://ssrn.com/abstract=1810862 or http://dx.doi.org/10.2139/ssrn.1810862

Florian Misch (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Richard Kneller

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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