Do Taxes Matter for Long-Run Growth? Harberger's Superneutrality Conjecture
Do Taxes Matter for Long-Run Growth? Harberger's Superneutrality Conjecture

Author: Mr.Gian Milesi-Ferretti

Publisher: International Monetary Fund

Published: 1995-08-01

Total Pages: 42

ISBN-13: 1451955790

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Harberger’s superneutrality conjecture contends that, although in theory the mix of direct and indirect taxes affects investment and growth, in practice growth effects of taxation are negligible. This paper provides evidence in support of this view by testing the predictions of endogenous growth models driven by human capital accumulation. The theoretical analysis highlights implications of different taxes for growth and investment in these models. The empirical work is based on cross-country regressions and numerical simulations, using a new methodology for estimating aggregate effective tax rates. Results show significant investment effects from income and consumption taxes that are consistent with small growth effects. The results are robust to the introduction of other growth determinants.

The Value Added Tax and Growth: Design Matters
The Value Added Tax and Growth: Design Matters

Author: Mr.Santiago Acosta Ormaechea

Publisher: International Monetary Fund

Published: 2019-05-07

Total Pages: 38

ISBN-13: 149831418X

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Does the design of a tax matter for growth? Assembling a novel dataset for 30 OECD countries over the 1970-2016 period, this paper examines whether the value added tax (VAT) may have different effects on long-run growth depending on whether it is raised through the standard rate or through C-efficiency (a measure of the departure of the VAT from a perfectly enforced tax levied at a single rate on all consumption). Our key findings are twofold. First, for a given total tax revenue, a rise in the VAT, financed by a fall in income taxes, promotes growth only when the VAT is raised through C-efficiency. Second, for a given VAT revenue, a rise in Cefficiency, offset by a fall in the standard rate, also promotes growth. The implication is thus that in OECD countries broadening the VAT base through fewer reduced rates and exemptions is more conducive to higher long-run growth than a rise in the standard rate.

Growth Effects of Income and Consumption Taxes
Growth Effects of Income and Consumption Taxes

Author: Mr.Gian Milesi-Ferretti

Publisher: International Monetary Fund

Published: 1995-07-01

Total Pages: 38

ISBN-13: 1451848234

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The effects of income and consumption taxation are examined in the context of models in which the growth process is driven by the accumulation of human and physical capital. The different channels through which these taxes affect economic growth are discussed, and it is shown that in general the taxation of factor incomes (human and physical capital) is growth-reducing. The effects of consumption taxation on growth depend crucially on the elasticity of labor supply, and therefore on the specification of the leisure activity. The paper also derives some implications for the optimal intertemporal choice of tax instruments.

The Economics and Econometrics of Innovation
The Economics and Econometrics of Innovation

Author: David Encaoua

Publisher: Taylor & Francis US

Published: 2000-04-30

Total Pages: 620

ISBN-13: 9780792378006

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This overview of work in the field of innovation and technical change collects 22 contributions that reflect worldwide research efforts and the role of economic incentives in shaping and directing innovative activities. The papers are from the 10th International ADRES conference.

Welfare States
Welfare States

Author: Peter H. Lindert

Publisher: Cambridge University Press

Published: 2019-01-03

Total Pages: 59

ISBN-13: 110862653X

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The traditionally, and wrongly, imagined vulnerabilities of the welfare state are economic. The true threats are demographic and political. The most frequently imagined threat is that the welfare state package reduces the level and growth of GDP. It does not, according to broad historical patterns and non-experimental panel econometrics. Large-budget welfare states achieve a host of social improvements without any clear loss of GDP. This Element elaborates on how this 'free lunch' is gained in practice. Other threats to the welfare state are more real, however. One is the rise of anti-immigrant backlash. If combined with heavy refugee inflows, this could destroy future public support for universalist welfare state programs, even though they seem to remain economically sound. The other is that population aging poses a serious problem for financing old age. Pension deficits threaten to crowd out more productive social spending. Only a few countries have faced this issue well.