A note on taxation and economic growth nexus

View at publisher
Authors: Constantina Kottaridi, Michael Polemis
Cited by: 0

Abstract

We examine the relationship between taxation and economic growth using several tax variables for a sample of OECD economies over the period 1980-2020. Our dynamic panel GMM threshold model follows the spirit of Seo and Shin (2016), hence we can trace nonlinearities in the taxation-growth nexus following recent theoretical developments. We unmask a statistically significant inverted 'U-shaped' relationship between effective tax rates and economic growth justifying a more efficient reformulation of public policy toward tax reforms. Further, the mixed evidence surrounding the effects of different tax indicators suggests that a one-size-fits-all approach may not be effective. Instead, tailored tax policies that account for the unique economic contexts of different countries, especially within the OECD framework, could lead to more effective economic outcomes.

Fields of Study & Subjects

Fiscal Policy and Economic Growth Taxation and Compliance Studies Corporate Taxation and Avoidance

Publication details

Journal / source
International Journal of Computational Economics and Econometrics
Volume
16
Issue
1/2
Pages
92–105
Publication date
1 January 2026
Language
EN