“Tax structure and economic growth : how can we reconcile the literature and what are the takeaway results ?”
Abstract : The effect of tax structure and tax shifts on economic growth has been studied for the past ten years in the economic literature. This literature, although working most of the time on the same database, has levered contradictory results : some studies showing a strong bond between tax structure and economic growth and others concluding on the absence of clear links between these two. This paper tries to reconcile this literature and to understand the origin of the differences in results. We reassess the link between tax structure and economic growth on new extended datasets. We point out and particularly test for the use of literature specific control variable and we show that differences in controls variables could have impacted previous results. Finally, we assess results that are robust to different control specifications and reassess the link between tax structure and growth in the light of these new concerns.