NOTE ON CONVERGENCE UNDER INCOME TAX PROGRESSIVITY

Patrick Pintus

Macroeconomic Dynamics, 2008, vol. 12, issue 2, 286-299

Abstract: Building on the theoretical prediction that income tax progressivity increases the speed of convergence in neoclassical, open-economy growth models, this paper asks whether tax progressivity is a potential source of differences across regions in convergence rates. In a sample of U.S. data, over the period 1920–1990, regional convergence and tax progressivity are found to be positively correlated, which supports the theoretical results. Moreover, some data on six OECD countries also accord with such a positive relationship. Overall, the model is successful in predicting the large range of available convergence estimates when the tax rate is elastic enough with respect to the tax base.

Date: 2008
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