Econometric modelling of tax impact on economic growth: Panel evidence from oecd countries

Abstract

© 2018, Bucharest University of Economic Studies. All rights reserved. The research paper provides an empirical evaluation of the tax effects on economic growth in 35 OECD countries from 1996 to 2016. The objective of this paper is to find how taxes effect on the economy, where analysis involves gross domestic product as a proxy for economic growth. Ensuring fundamental econometric procedures, the research paper reflects fixed effect model which measure the impact of tax revenue growth, personal income tax, corporate income tax, social security contributions, tax on goods and services and tax on property on dependent variable as a gross domestic product. The analysis includes main macroeconomic determinants as an inflation, unemployment, government expenditure and investment in observed countries. Results show that 1% increase of tax revenue growth enhances the gross domestic product for 0.29% which is confirmed previous studies that manifested significant and positive relationship between these variables. Further, there is recorded the significant and positive effect of tax on property on economic growth, where 1% increase of this tax form raises a gross domestic product for 0.21%. On the contrary, tax on goods and services have a harmful effect on economic growth, where 1% increase of them cause gross domestic product drop of 0.60%, which is statistically significant.