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Taxation of Income and Economic Growth: An Empirical Analysis of 25 Rich OECD Countries

Dackehag, Margareta LU and Hansson, Åsa LU (2012)
Abstract
Several empirical papers have studied the effect of government size, typically measured as government expenditures, on economic growth. There is no consensus on the direction of this impact, even though more recent studies tend to find a negative relationship between the general level of government expenditures and economic growth. This negative relationship is explained by the distortions that raising tax revenues cause on economic activities. There are, however, several ways to raise tax revenues that likely have different distortionary effects and, hence, may impact economic growth differently. This paper analyses how taxation of income influences economic growth. More precisely we study how statutory tax rates on corporate and personal... (More)
Several empirical papers have studied the effect of government size, typically measured as government expenditures, on economic growth. There is no consensus on the direction of this impact, even though more recent studies tend to find a negative relationship between the general level of government expenditures and economic growth. This negative relationship is explained by the distortions that raising tax revenues cause on economic activities. There are, however, several ways to raise tax revenues that likely have different distortionary effects and, hence, may impact economic growth differently. This paper analyses how taxation of income influences economic growth. More precisely we study how statutory tax rates on corporate and personal income affect economic growth by using panel data from 1975 till 2010 for 25 rich OECD countries. We find that both taxation of corporate and personal income negatively influence economic growth. The correlation between corporate income taxation and economic growth is more robust, however. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
taxation of personal income, Economic growth, taxation of corporate income
pages
33 pages
publisher
Department of Economics, Lund Universtiy
language
English
LU publication?
yes
id
309807fd-2c10-4c43-bbac-9dfe94f81432 (old id 2539624)
alternative location
http://swopec.hhs.se/lunewp/
date added to LUP
2012-05-10 15:02:00
date last changed
2016-04-16 07:52:55
@misc{309807fd-2c10-4c43-bbac-9dfe94f81432,
  abstract     = {Several empirical papers have studied the effect of government size, typically measured as government expenditures, on economic growth. There is no consensus on the direction of this impact, even though more recent studies tend to find a negative relationship between the general level of government expenditures and economic growth. This negative relationship is explained by the distortions that raising tax revenues cause on economic activities. There are, however, several ways to raise tax revenues that likely have different distortionary effects and, hence, may impact economic growth differently. This paper analyses how taxation of income influences economic growth. More precisely we study how statutory tax rates on corporate and personal income affect economic growth by using panel data from 1975 till 2010 for 25 rich OECD countries. We find that both taxation of corporate and personal income negatively influence economic growth. The correlation between corporate income taxation and economic growth is more robust, however.},
  author       = {Dackehag, Margareta and Hansson, Åsa},
  keyword      = {taxation of personal income,Economic growth,taxation of corporate income},
  language     = {eng},
  pages        = {33},
  publisher    = {ARRAY(0xd185c08)},
  title        = {Taxation of Income and Economic Growth: An Empirical Analysis of 25 Rich OECD Countries},
  year         = {2012},
}