 Tax Capacity and Growth: Is there a Tipping Point?Vitor Gaspar, Laura Jaramillo and Philippe Wingender No 2016/234, IMF Working Papers from International Monetary Fund Abstract: Is there a minimum tax to GDP ratio associated with a significant acceleration in the process of growth and development? We give an empirical answer to this question by investigating the existence of a tipping point in tax-to-GDP levels. We use two separate databases: a novel contemporary database covering 139 countries from 1965 to 2011 and a historical database for 30 advanced economies from 1800 to 1980. We find that the answer to the question is yes. Estimated tipping points are similar at about 12¾ percent of GDP. For the contemporary dataset we find that a country just above the threshold will have GDP per capita 7.5 percent larger, after 10 years. The effect is tightly estimated and economically large. Keywords: WP; real GDP; growth rate; base year; tax-to-GDP ratio; income per capita; taxation; development; multiple equilibria; tax-to-GDP threshold; tax-to-GDP level; point estimate; tax-to-GDP distribution; tax-to-GDP tipping point; State capacity; GDP series; Social security contributions; Legal support in revenue administration; Public investment spending; Threshold analysis; Global (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2016/234 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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