ANALYSIS OF TAX REVENUES AND ECONOMIC GROWTH RELATIONSHIP THROUGH PANEL DATA METHOD: EVIDENCE FROM OECD COUNTRIES

Year 2021, 2021 Volume 23 Special Issue: IERFM, 53 - 72, 23.08.2021

Mehmet Altuntaş , Emre Kılıç , Nedim Mercan , Ersin Yavuz

https://doi.org/10.26468/trakyasobed.866853

Abstract

Tax is the most important source of income for governments in the historical process and recently. Such an important source of income naturally creates significant effects on society and economy. Therefore, it is important that the tax policies implemented by the governments coincide with the conditions and requirements of the country. Otherwise, social unrest and economic problems are inevitable.
The study discusses how tax revenues affect economic growth. There are quite a few studies in the literature on the impact of tax revenues on economic growth. However, the results of these studies may vary in the context of the countries, empirical method and the period analyzed.
The purpose of the study, 24 OECD countries (Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, Turkey, UK, USA) is to analyze the relationship between tax revenues and economic growth. The reason why 24 countries were chosen among OECD countries stems from the limited data on variables. Since the tax revenues and economic growth variables used in the analysis are nominal, they are realized with the deflator and their natural logarithms are used. Economic growth used as a dependent variable and tax revenues are used as explanatory variable. The data covers the period 1980-2018. In the study, panel cointegration method is used in accordance with the literature. In order to determine the correct panel cointegration method, first, cross section dependency and homogeneity properties were examined.The methods developed by Swamy (1970) is used for test the homogeneity and Pesaran (2004) is used for test the cross-section dependency test.
The results reveal that the panel model includes cross-sectional dependency and is heterogeneous. The findings show that the second generation panel methods are the methods that best describe the data set. After this stage, the second generation panel unit root test first developed by Pesaran (2007) was used. According to the findings, all variables from the panel point of view contain unit root at the level for the constant model and become stationary when the first difference is taken. On a cross-section basis, it contains unit root at the level of variables in most of the countries and when the first difference is taken, it becomes stationary. After the panel unit root test, the second generation panel cointegration test developed by Westerlund (2007) is performed to analyze the long-term relationship between variables. The results provide evidence that there is a cointegration relationship between tax revenues and economic growth at the %1 significance level. After determining the cointegration relationship, the DOLSMG estimator developed by Pedroni (2001) is applied in order to estimate the coefficient among variables. According to the test results, %1 change in tax revenues in the panel model increases the economic growth by %1.117. According to the findings obtained on a cross-section basis, the estimator coefficients are significant in all countries except Sweden. In addition, tax revenues have a positive effect on economic growth in all countries except Greece. The Netherlands is the country with the highest positive impact of tax revenues on economic growth with a coefficient of %2,363. Other countries with a coefficient above %2 are Germany and Belgium; those between %2 and %1 in Australia, Austria, Canada, Denmark, France, Iceland, Ireland, Japan, Luxembourg, New Zealand, Norway, Turkey, United Kingdom and the United States; Those below %1 are listed as Finland, Italy, Korea, Spain and Switzerland.
According to the result of the study, tax revenues and economic growth variables move together in the long run. In addition, tax revenues positively affect economic growth in terms of coefficient. However, the fact that the coefficients are generally below %3 indicates that tax policies are not used at an optimal level. Governments should consider both the welfare of their citizens and economic growth when formulating their tax policies. In order to make more detailed determinations on country basis, it is recommended to examine the composition of tax revenues of the relevant country under separate headings in future studies. 

VERGİ GELİRLERİ VE EKONOMİK BÜYÜME İLİŞKİSİNİN PANEL VERİ YÖNTEMİYLE ANALİZİ: OECD ÜLKELERİNDEN KANITLAR

Abstract

Çalışmada, 24 OECD ülkesinde vergi gelirleri ile ekonomik büyüme arasındaki ilişki 1980-2018 dönemi için analiz edilmektedir. Ampirik analizde, literatüre uygun olarak Westerlund (2007) tarafından önerilen panel eşbütünleşme yönteminden yararlanılmaktadır. Elde edilen bulgulara göre, vergi gelirleri ile ekonomik büyüme arasında eşbütünleşme ilişkisi bulunmaktadır. Sonrasında Pedroni (2001) tarafından önerilen DOLSMG panel eşbütünleşme tahmincisi kullanılarak elde edilen katsayıya göre, vergi gelirlerinin ekonomik büyüme üzerinde pozitif etkisi olduğu sonucuna ulaşılmaktadır. Kesit bazında sonuçlar değerlendirildiğinde, İsveç dışında tüm ülkelerin katsayıları istatistiksel olarak anlamlıdır. Bu ülkelerin içinde ise sadece Yunanistan’ın katsayısı negatiftir. Özetle, analiz edilen ülkelerin önemli kısmında, vergi yapısı ekonomik büyümeyi olumlu yönde teşvik etmektedir. 

Keywords

Vergi, Ekonomik Büyüme, OECD, Panel Eşbütünleşme Analizi

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