Tax progressivity and output : evidence from OECD countries

• Autor(a) principal: Jalles, João Tovar
• Data de Publicação: 2023
• Outros Autores: Karras, Georgios
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.5/29134
• topic: Tax progressivity; Tax rates; Economic Growth; Panel Data; Local Projections

Compared to the economic effects of tax rates, those of tax progressivity have been much less studied. In this paper, we estimate the output effects of changes in tax progressivity using a data set of 33 OECD economies since 1980. Our results show that tax progressivity affects the economy in a way that is broadly consistent with the predictions of a standard neoclassical growth model. In particular, increasing tax progressivity reduces the economy’s growth rate temporarily and the level of income per capita permanently. Both effects are sizable, statistically significant, and robust. Our findings also emphasize the importance of including both the tax rate and tax progressivity in the estimation: omitting either can lead to biased results.