 Do tax revenues track economic growth? Comparing panel data estimatorsAntoine Cornevin, Juan Sebastian Corrales and Juan Pablo Angel Mojica Economic Modelling, 2024, vol. 140, issue C Abstract: Determining how economic growth affects tax revenues is crucial for fiscal sustainability, economic stabilization, and policy design. The current literature on tax buoyancy presents contrasting estimates, highlighting the need for a systematic discussion of the trade-offs associated with different estimators. This paper provides new empirical evidence by reviewing a range of panel data estimators in a large sample of 172 countries from 1990 to 2019. We find evidence of lower estimates for tax responses to economic activity in the short term relative to previous literature, suggesting a limited automatic stabilization power of tax systems. The heterogeneity in our results within and across income groups underscores the importance of choosing the appropriate estimator. Our results remain broadly unchanged when we introduce new control variables to disentangle discretionary from automatic tax revenue variations, indicating that economic cycles do not significantly influence the timing of tax policies. Keywords: Tax buoyancy; Tax elasticity; Cross-sectional dependence; Economic growth; Fiscal sustainability; Automatic stabilization (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:eee:ecmode:v:140:y:2024:i:c:s0264999324002244 DOI: 10.1016/j.econmod.2024.106867 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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