Tax structure and economic growth

Direct versus Indirect Taxation: Trends, Theory, and Economic Significance

“…Li and Sarte (2004) find evidence that the decreases in progressivity associated with the Tax Reform Act of 1986 (TRA-86) in the US lead to small but non-negligible increases in US long-run growth (from 0.12 to 0.34 percentage points). Finally, Lee and Gordon (2005), using panel data for 70 countries cov ering the period 1970-97, find in cross-sectional regressions and fixedeffects regressions that higher corporate tax rates are associated with lower growth rates.…”

Personal Income Tax and Economic Growth: A Comparative Study Between China and Pakistan

“…Exogenous growth theory discusses that changes in tax strategy may not have long run growth effect but also generate temporary effects (Ramsey, 1928;Solow, 1956;Lee and Gordon, 2005). On the other side, the proponents of endogenous theory believe that change in tax rate may have long run growth effect and increase economic activity (Romer, 1986;Lucas, 1988;Easterly and Rebelo, 1993).…”

Growth effects of annuities and government transfers in perpetual youth models

“…We show that perpetual youth models with annuities have three forces that modify economic growth relative to the benchmark economy with infinitely-lived agents: (i) impatience (−), (ii) effective risk-free rate (+), and (iii) accidental bequests (−), where (±) denote the positive or negative effect on growth. The first negative effect always dominates the second positive effect, and hence the growth rate unambiguously decreases in perpetual youth models relative to the benchmark case, which is 1 Although our paper is purely theoretical, for empirical evidence on the relation between taxation and growth, see for example Engen and Skinner (1996) and Lee and Gordon (2005).…”