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Explaining output volatility: The case of taxation

Olaf Posch ()

Journal of Public Economics, 2011, vol. 95, issue 11, 1589-1606

Abstract: This paper presents strong empirical evidence that the observed heterogeneity of output volatility across countries and over time is partly endogenous. In particular, based on a closed-form solution we obtain a (long-run) equilibrium relationship between taxes and output volatility in the stochastic neoclassical growth model by showing that asymptotically the variance of output growth rates is affected by the level of taxes, without affecting the mean. We estimate the tax semi-elasticities on output volatility and provide convincing empirical evidence that taxes are important to understand differences in output volatility among OECD countries.

Keywords: Macroeconomic volatility; Tax effects; Continuous-time DSGE models (search for similar items in EconPapers)
JEL-codes: E32 E62 H31 (search for similar items in EconPapers)
Date: 2011
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Related works:
Working Paper: Explaining Output Volatility: The Case of Taxation (2009) Downloads
Working Paper: Explaining output volatility: The case of taxation (2008) Downloads
Working Paper: Explaining Output Volatility: the Case of Taxation (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:95:y:2011:i:11:p:1589-1606

DOI: 10.1016/j.jpubeco.2011.05.009

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