Abstract

CASTRO, Conceição. The impact of tax reduction on labor, capital and consumption in EU15’s economic growth. Economia Global e Gestão [online]. 2011, vol.16, n.3, pp.47-73. ISSN 0873-7444.

This article aims to investigate whether a reduction in taxes on labor, capital and consumption can permanently affect economic growth, validating the endogenous growth model or, by contrast, affect only the level of output (exogenous growth theory). Using the effective tax rates by economic functions, estimated by Martinez-Mongay (2000) on a time-series dynamic model, which allow studying short and long term effects, the results for 14 Member States of the EU15, in the period 1970-2000, seem to be consistent with the endogenous growth paradigm. In particular, cuts in labor and capital taxes could stimulate long-run growth.

Keywords : Fiscal Policy; Effective Tax Rates on Labour; Capital and Consumption; Economic Growth.

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