Tax Policy and Economic Growth: Does It Really Matter?

17 Pages Posted: 15 Mar 2017

See all articles by Donatella Baiardi

Donatella Baiardi

University of Pavia; University of Parma

Paola Profeta

Bocconi University - Department of Policy Analysis and Public Management; CESifo (Center for Economic Studies and Ifo Institute)

Riccardo Puglisi

University of Pavia; University of Milan - Centro Studi Luca d'Agliano (LdA)

Simona Scabrosetti

University of Pavia - Department of Public and Territorial Economics

Date Written: February 21, 2017

Abstract

We challenge the “OECD view” (Arnold et al. 2011) according to which a shift from direct to indirect taxation is associated with higher long-run economic growth. We study the relationships between per capita GDP, overall tax revenue and tax composition (in particular direct vs. indirect taxation). We can replicate the findings in Arnold et al. when focusing on the same sample of countries and time period, but not when adopting more cautious estimates of the standard errors. The results are not robust to adding countries and/or extending the time period under consideration. They also differ in the short- and long-run.

Keywords: economic growth, taxation, tax mix, OECD countries

JEL Classification: E620, H200, P500

Suggested Citation

Baiardi, Donatella and Profeta, Paola and Puglisi, Riccardo and Scabrosetti, Simona, Tax Policy and Economic Growth: Does It Really Matter? (February 21, 2017). CESifo Working Paper Series No. 6343. Available at SSRN: https://ssrn.com/abstract=2932798

Donatella Baiardi

University of Pavia ( email )

Corso Strada Nuova, 65
27100 Pavia, 27100
Italy

University of Parma ( email )

Via Amendola 10
Parma, 43100
United States

Paola Profeta

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Riccardo Puglisi (Contact Author)

University of Pavia ( email )

Corso Strada Nuova, 65
27100 Pavia, 27100
Italy

University of Milan - Centro Studi Luca d'Agliano (LdA) ( email )

Via P. Amedeo 34
Milano, Mi 20122
Italy

Simona Scabrosetti

University of Pavia - Department of Public and Territorial Economics ( email )

Corso Strada Nuova, 65
Pavia, 27100
Italy

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