Working Paper: CEPR ID: DP9261
Authors: Nir Jaimovich; Sergio Rebelo
Abstract: We study a model in which the effects of taxation on growth are highly non-linear. Marginal increases in tax rates have a small growth impact when tax rates are low or moderate. When tax rates are high, further tax hikes have a large, negative impact on growth performance. We argue that this non-linearity is consistent with the empirical evidence on the effect of taxation and other disincentives to investment and innovation on economic growth.
Keywords: growth; taxes
JEL Codes: H2; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| marginal increases in tax rates (low or moderate) (H29) | growth (O40) |
| high tax rates (H29) | growth (O40) |
| high tax rates (H29) | stagnation in innovation and growth (O39) |
| taxation (H20) | migration decisions (F22) |
| migration decisions (F22) | growth rate of the economy (O49) |
| the impact of taxes (H31) | growth (O40) |
| moderate tax increases (H29) | growth (O40) |
| excessive taxation (H29) | economic performance (P17) |