The Relationship Between Tax Elasticity and The Size of Public Sector in Turkey

Abstract

Tax elasticity, calculated by dividing the proportional change in tax revenues by the proportional change in the tax base, helps to provide automatic stability in public revenues. In this study, we aimed to determine the relationship between the total tax revenue elasticity and the size of the public sector for the period 1990-2019 in Turkey, there is no causality in the short term, but oneway causality from the size of the public sector to tax elasticity was determined in the long term. Also, population change, and economic growth affect the size of the public sector because one-way causality towards the size of the public sector has been determined.