The macroeconomic effects of a switch from direct to indirect taxes: An empirical assessment

J. Madsen, Dick Damania

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This paper investigates the macroeconomic effects of switching the tax burden from direct to indirect taxes in an empirical model based on 22 OECD countries. The Engle-Yoo three step procedure is employed to estimate both the short and long run effects of such a tax switch. The results reveal that a switch from direct to indirect taxes is likely to generate efficiency gains in the short run which lead to higher levels of aggregate output. However, for the majority of countries in the sample the tax changes have no impact on the level of economic activity in the long run.

Original languageEnglish
Pages (from-to)566-578
Number of pages13
JournalScottish Journal of Political Economy
Volume43
Issue number5
DOIs
Publication statusPublished - 1 Jan 1996

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