Working Paper: NBER ID: w2020
Authors: Daniel R. Feenberg; Harvey S. Rosen
Abstract: It has been hypothesized that a jurisdiction's tax structure exerts an independent effect upon the growth of its public sector. We test this hypothesis by examining the relationship between the growth of state general expenditure and the elasticity of tax revenues with respect to income. The work takes advantage of a very careful set of income elasticities for the personal income and sales tax systems for each state, for every year from 1978 to 1983. The main conclusion is that the data do not support the notion that the form of the tax structure exerts an independent effect on public sector growth.
Keywords: tax structure; public sector growth; elasticity of tax revenues
JEL Codes: H20; H71
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| income elasticity of tax structure (H31) | public sector growth (J45) |
| elasticity of tax revenues with respect to income (H30) | public sector growth (J45) |