THE RELATIONSHIP BETWEEN TAXATION AND ECONOMIC GROWTH. STUDY CASE: CEE COUNTRIES

Loredana Andreea Chitoiu and Dragos Mihai Ungureanu
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Loredana Andreea Chitoiu: Lucian Blaga University of Sibiu
Dragos Mihai Ungureanu: Spiru Haret University of Bucharest

Revista Economica, 2022, vol. 74, issue 3, 23-34

Abstract: Economists argue that macroeconomic activity can be affected differently, through direct taxes and indirect taxes. the impact of tax levies on the economy is contradictory, there are studies that show their negative influence, and others support the positive influence of taxes on the economy of a state. These debates and contradictory results are a consequence of the way of using fiscal policy instruments, within each state, but also of the level of development, as well as of the research method used and the variables included in the model. The objective of the present research refers to the investigation of the impact of tax revenues, but also of social security contributions on the gross domestic product, the main measure of the size of the economy. The reference period within the panel study, it covers the years q12005-q42020, and the empirical results cover both developing and developed nations in the CEE. The choice of year 2005 as the starting period is motivated by highlighting the period before and after the economic-financial crisis, regarding the analysis of the existing interaction between the fiscal system and the economy of the states in the sample. The research methodology involves the study of three heterogeneous panel groups. The analysis method is the random effect panel regression, on the basis of which it was demonstrated that there are significant and positive correlations between the fiscal variables and the gross domestic product. The research results draw attention to the fact that the fiscal effect on the economic growth is lower, but not negligible, in relation to other influencing factors, which were not taken into account in the present analysis.

Keywords: indirect taxes; direct taxes; social security contributions; economic growth; panel regression analysis (search for similar items in EconPapers)
JEL-codes: H20 O11 O23 O41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:blg:reveco:v:74:y:2022:i:3:p:23-34

DOI: 10.56043/reveco-2022-0023

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