Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263712 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9782
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
In this empirical study we assess both linear and nonlinear relationship between total taxation and several tax items with real per capita GDP growth rates for 43 developing countries between 1990 and 2019. We use panel data techniques to evaluate the effects of taxation on economic growth for both short and long run perspectives, and to find optimal tax threshold values. We obtain evidence of nonlinear relationships between all tax items, except for corporate income taxation, as well as an optimal value for total tax burden around 23,5% of GDP for the whole sample. When the sample is subdivided by countries' income levels, we find threshold values for all tax items and an optimal tax burden around 23,6% of GDP for high income countries and 21,3% of GDP for low income. Our results provide support regarding the existence of nonlinearities and about policies focused on raising certain tax revenues, as a percentage of GDP, without hampering economic growth.
Subjects: 
economic growth
fiscal policy
optimal taxation
tax thresholds
JEL: 
E62
H21
O47
Document Type: 
Working Paper
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