The Robust Relationship Between Taxes and State Economic Growth

W. Reed (bob.reed@canterbury.ac.nz)

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: I estimate the relationship between taxes and economic growth using data from 1970-1999 and the forty-eight continental U.S. states. I find that taxes used to fund general expenditures are associated with significant, negative effects on economic growth. Further, this finding is robust across (i) alternative variable specifications, (ii) alternative estimation procedures, (iii) alternative ways of dividing the data into "five-year" periods, and (iv) allowing for individual-specific time and state effects. I also provide an explanation for why previous research has had difficulty identifying this "robust" relationship.

Keywords: U.S. states; Economic development; Economic growth; Fiscal policy; Taxes; Tax burden; Panel data (search for similar items in EconPapers)
JEL-codes: H71 O18 R11 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2006-11-25
New Economics Papers: this item is included in nep-geo and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:06/13

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