Title page for ETD etd-0702103-155417


Type of Document Dissertation
Author Arin, Kerim Peren
Author's Email Address karin1@lsu.edu
URN etd-0702103-155417
Title An Empirical Investigation of Tax Policy in G-7 Countries
Degree Doctor of Philosophy (Ph.D.)
Department Economics
Advisory Committee
Advisor Name Title
Faik Koray Committee Chair
Dek Terrell Committee Member
Douglas McMillin Committee Member
Marios Zachariadis Committee Member
Terry Geske Dean's Representative
Keywords
  • indirect taxes
  • social security taxes
  • income taxes
  • var models
  • tax policy
  • corporate taxes
Date of Defense 2003-04-04
Availability unrestricted
Abstract
This dissertation consists of three essays on the effects of fiscal policy on the economic activity. The first and second chapters investigate the response of major macroeconomic variables to four different types of tax policy innovations within a VAR framework using contemporaneous restrictions and long-run restrictions, respectively. Although G-7 countries seem to react differently to tax policy innovations, we do not find any evidence for the existence of negative corporate tax multipliers (for output) or positive income tax multipliers (for output) with both identification schemes. The cross-country variation in the signs of indirect tax is considerably higher. The effects of social security tax innovations on output exhibit cross-country heterogeneity with contemporaneous restrictions. We do not find any significant effects of social security tax innovations on output with a SVAR approach that uses long-run restrictions. We conclude that the composition of the total tax response is even more important than the magnitude of the total tax response, and thus should be taken into consideration in explaining cross-country variation in the sign and magnitude of tax multipliers.

The third chapter of this dissertation uses an unbalanced panel data set that includes annual estimates of cyclically adjusted government expenditures, capital outlays, income tax revenues, indirect tax revenues, corporate tax revenues and social security tax revenues. The percentage share of these estimates in GDP is used to investigate the effects of fiscal policy on economic growth, and results are compared with regression results that use 5-year averages of cyclically unadjusted variables. The empirical results from both sets of regressions suggest that only taxes on household income have negative effects on per capita income growth. We also show that government expenditures that include the government wage bill have significant negative effects on economic growth. These results are consistent with the recent literature that emphasizes the non-Keynesian effects of fiscal policy through labor market, firm profits and private investment. We consolidate our findings by showing that both government expenditures and income taxes have distortionary effects on private investment.

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