On the ineffectiveness of tax policy in altering long-run growth: Harberger's superneutrality conjecture

Mendoza, Enrique G.; Milesi‐Ferretti, Gian Maria; Asea, Patrick K.

doi:10.1016/s0047-2727(97)00011-x

Cited by 409 publications

(374 citation statements)

References 18 publications

Supporting

Mentioning

309

Contrasting

Unclassified

Order By: Relevance

“…Hungerford (2012) has found support for the position that taxes have no impact on economic growth when the USA experience from the end of World War II in 1945 to 2011 was examine. The examination of 18 OECD countries by Mendoza et al (1997) and Osundina and Olanrewaju (2013) also report that the effect of taxation on national growth was insignificant. Although effective consumption taxes increase investment, the overall tax burdens have no effect on investment or growth of the economy.…”

Section: Tunisiamentioning

confidence: 99%

Taxation revenue and economic growth in Africa

Babatunde¹,

Ibukun²,

Oyeyemi³

2017

J. Account. Taxation

View full text Add to dashboard Cite

As most developing countries strive to achieve economic growth and development through taxation, they face numerous economic challenges. The debate on the effectiveness of taxes as a tool for promoting growth and development remains inconclusive, as several studies have indicated mixed impacts of tax on economic growth. Against this background, the study investigated the impact of taxation on economic growth in Africa from 2004 to 2013. The study carried out various preliminary tests including descriptive statistics, and stationary tests using Augmented Dickey Fuller (ADF) test, Levin et al. test, Im, Pesaran and Shin W-stat tests. The appropriate fixed and random effect test was employed to determine the fitness of the model using the Hausman test. The study conducted the Hausman-Test to determine the appropriate estimator between Fixed and Random Effect. To confirm the robustness and validity of regression model, some post estimation tests are conducted which were omitted Variable Test, and Heteroscedasticity test. Findings indicated that tax revenue is positively related to GDP and promotes Economic Growth in Africa. It was significant at 5% level. The study concluded that tax revenue has a significant positive relationship with Gross Domestic Product. Therefore, high and weak levels of taxation are favorable to economic growth as upheld by the economic effect of Ibn Khaldun's theory on taxation, which approves the positive impact that lower tax rate have on work, output and economic performance. However, in the midst of harsh economic conditions such as crashing oil prices, rising exchange rates, drop in Naira value, the governments should be ready to develop a comprehensive tax structure or model that will grow, nurture and sustain its tax economic base so as to drive economic performance.

show abstract

Section: Tunisiamentioning

confidence: 99%

Taxation revenue and economic growth in Africa

Babatunde¹,

Ibukun²,

Oyeyemi³

2017

J. Account. Taxation

View full text Add to dashboard Cite

show abstract

“…In this alternative calibration, we allow for different rates on labor and capital income. In principle, we could have used the effective tax rates calculated by Mendoza et al (1997) or McGrattan and Prescott (2005) but we decided not to do so because these authors do not provide information on mortgage deductions. Since TAXSIM reports the effective deduction on mortgages, we prefer to use its estimates.…”

Section: Appendix C Alternative Calibration Using Taxsimmentioning

confidence: 99%

On the user cost and homeownership

Díaz

Luengo‐Prado

2008

Review of Economic Dynamics

115

View full text Add to dashboard Cite

This paper studies the differences in the cost of housing services for renters and homeowners and calculates the bias that results when we value owner-occupied housing services using a rental equivalence approach. Our framework is a life-cycle model with endogenous tenure choice with households facing idiosyncratic uninsurable earnings risk and housing price risk. We model houses as illiquid assets that provide collateral for loans. To analyze the impact of preferential housing taxation on the tenure choice and the bias, we consider a tax system that mimics that of the US economy. Namely, owner-occupied housing services are not taxed and mortgage interest payments are deductible. Through simulations, we show that a rental equivalence approach (relative to a user cost approach) overestimates the cost of housing services. The magnitude of the bias is very sensitive to both the income tax rate and the size of adjustment costs in the housing market.JEL classification: E21; C80; E39

show abstract

“…There has also been a lot of empirical work conducted on the link between growth rates and tax structure (see, e.g. Mendoza et al (1997) and also Angelopoulos et al (2007a) for a recent review of this literature). Broadly consistent with the …ndings of the quantitative DGE models, the preponderance of estimation evidence suggests that tax reform has either small or insigni…cant e¤ects on growth.…”

Section: Introductionmentioning

confidence: 99%

Tax structure, growth, and welfare in the UK

Angelopoulos

Malley

Philippopoulos

2011

Oxford Economic Papers

View full text Add to dashboard Cite

This paper studies the quantitative implications of changes in the composition of taxes for long-run growth and expected lifetime utility in the UK economy over 1970-2005. Our setup is a dynamic stochastic general equilibrium model incorporating a detailed …scal policy structure, and where the engine of endogenous growth is human capital accumulation. The government's spending instruments include public consumption, investment and education spending. On the revenue side, labour, capital and consumption taxes are employed. Our results suggest that if the goal of tax policy is to promote long-run growth by altering relative tax rates, then it should reduce labour taxes while simultaneously increasing capital or consumption taxes to make up for the loss in labour tax revenue. In contrast, a welfare promoting policy would be to cut capital taxes, while concurrently increasing labour or consumption taxes to make up for the loss in capital tax revenue.

show abstract

On the ineffectiveness of tax policy in altering long-run growth: Harberger's superneutrality conjecture

Cited by 409 publications

References 18 publications

Taxation revenue and economic growth in Africa

Taxation revenue and economic growth in Africa

On the user cost and homeownership

Tax structure, growth, and welfare in the UK

Contact Info

Product

Resources

About