Non-linear effects of tax changes on output: The role of the initial level of taxation

• 成果类型: Article
• 署名作者: Gunter, Samara; Riera-Crichton, Daniel; Vegh, Carlos A.; Vuletin, Guillermo
• 署名单位: Colby College; The World Bank; Johns Hopkins University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2021.103450
• 发表日期: 2021
• 关键词: Tax multiplier; Tax policy; Tax rate; Value-added tax; Non-linear; Narrative approach

摘要

We estimate the effect of worldwide tax changes on output following the narrative approach developed for the United States by Romer and Romer (2010). We use a novel dataset on value-added taxes for 51 countries (21 industrial and 30 developing) for the period 1970-2014 to identify 96 tax changes. We then use contemporaneous economic records to classify such changes as endogenous or exogenous to current (or prospective) economic conditions. In line with theoretical distortionary and disincentive-based arguments - and using exogenous tax changes - we find that the effect of tax changes on output is highly non-linear. The tax multiplier is essentially zero under relatively low initial tax rate levels and more negative as the initial tax rate increases. Based on a global sample, these novel non-linear findings suggest that the recent consensus pointing to large negative tax multipliers in industrial countries, particularly in industrial Europe (e.g., Alesina, Favero, and Giavazzi, 2015) may represent a special case driven by high initial tax rates in these countries. (C) 2021 Published by Elsevier B.V.