The Effect of the Share of Taxes and Expenditures in National Income on Growth, a Multi-Country Analysis

Authors : Bora Kurtuluş

Pages : 84-97

Doi:10.21180/iibfdkastamonu.1343525

View : 125 | Download : 61

Publication Date : 2024-06-29

Article Type : Research Paper

Abstract :Economic growth stands as a crucial objective in macroeconomic policies. Within the scope of fiscal policy, government expenditures and tax revenues play significant roles. This study utilizes panel data from 103 countries spanning the period 2005 to 2019. After conducting tests for stationarity, homogeneity, and cross-sectional dependency, Panel Granger Causality tests and panel data analyses are carried out. Instead of nominal values, the shares of government expenditures and tax revenues in national income are considered. The findings reveal a reciprocal causal relationship between government expenditures and tax revenues, as indicated by the Granger Causality tests. Furthermore, economic growth is identified as a Granger cause for both tax revenues and government expenditures. While government expenditures Granger-cause growth in the short term, there is no statistically significant impact of tax revenues on economic growth. The panel regression analysis reveals a negative coefficient of government expenditures on growth, as well as a positive coefficient of taxes, both of which are statistically significant. Hence, it can be inferred that decreasing the share of government expenditures in national income positively affects economic growth while simultaneously increasing the share of tax revenues in national income. This dual effect not only contributes to economic growth but also helps achieve budget equilibrium.
Keywords : Ekonomik Büyüme, Maliye Politikası, Panel Veri Analizi, Zaman Serisi Analizi

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