Discussion Paper

No. 2019-43 | July 15, 2019
Composition of taxes and growth: evidence from OECD panel data


This paper analyzes the impact of the composition of taxes on economic growth using a panel of OECD countries. In contrast to Kneller et al. (Fiscal policy and growth: evidence from OECD countries, 1999), over 1980–2005 distortionary taxation does not reduce growth, while an increase in non-distortionary taxation has a negative association with growth. When the data are extended to the great recession and its recovery period (1980–2015), distortionary taxation significantly reduces growth as originally conjectured, but the negative effect of non-distortionary taxation survives. This paper argues that distortions from expenditure taxes in recent years can be accounted for by a combination of an exploding increased debt/GDP and globalization.

JEL Classification:

H20, E62, O40


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Cite As

Weijie Luo (2019). Composition of taxes and growth: evidence from OECD panel data. Economics Discussion Papers, No 2019-43, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2019-43

Comments and Questions

Anonymous - Referee Report 1
September 09, 2019 - 11:12

see attached file

Weijie Luo - Response to referee
September 12, 2019 - 07:50

see attached file