Asymmetric Effects of Direct and Indirect Taxes on Fertility: NARDL Approach

Abstract

The aim of the paper is to analyze the asymmetric effects of direct and indirect taxes on fertility rate in Türkiye for the period 1980-2023 with the help of empirical methods. The explanatory variables include direct and indirect taxes as well as economic growth rate, inflation rate and unemployment rate as control variables. In the analysis section, KSS unit root test and NARDL cointegration approaches that take into account the nonlinearity in the data structure are applied to detect asymmetric behavior. Empirical evidence reveals that the variables are cointegrated in the long run. According to the long-run coefficient findings, positive shocks in direct taxes, negative shocks in indirect taxes, economic growth, inflation and unemployment put pressure on fertility. On the flip side, negative shocks in direct taxes and positive shocks in indirect taxes improve fertility. The paper proves the asymmetric behavior of direct and indirect taxes on fertility. The findings reveal the need to structure direct taxes in the direction of a pronatalist approach in population policies. Lastly, the paper offers policy recommendations in the field of taxation in order to increase the fertility rate.

Keywords

• Asymmetric
• Direct Tax
• Fertility
• Indirect Tax
• NARDL

Asymmetric Effects of Direct and Indirect Taxes on Fertility: NARDL Approach

Abstract

The aim of the paper is to analyze the asymmetric effects of direct and indirect taxes on the fertility rate in Türkiye for the period 1980-2023 with the help of empirical methods. The explanatory variables include direct and indirect taxes as well as economic growth rate, inflation rate and unemployment rate as control variables. In the analysis section, KSS unit root test and NARDL cointegration approaches that take into account the nonlinearity in the data structure are applied to detect asymmetric behavior. Empirical evidence reveals that the variables are cointegrated in the long run. According to the long-run coefficient findings, positive shocks in direct taxes, negative shocks in indirect taxes, economic growth, inflation and unemployment put pressure on fertility. On the flip side, negative shocks in direct taxes and positive shocks in indirect taxes improve fertility. The paper proves the asymmetric behavior of direct and indirect taxes on fertility. The findings reveal the need to structure direct taxes in the direction of a pronatalist approach in population policies. Lastly, the paper offers policy recommendations in the field of taxation in order to increase the fertility rate.

Keywords

• NARDL
• Asymmetric
• Direct Tax
• Fertility
• Indirect Tax

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