Tax structure, growth, and welfare in the UK

Angelopoulos, Konstantinos; Malley, Jim; Philippopoulos, Apostolis

doi:10.1093/oep/gpr035

Cited by 24 publications

(25 citation statements)

References 31 publications

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“…The assumption that human capital productivity depends on public education expenditure is consistent with the goal of public education policy in practice, as well as with many theoretical works (see for instance Glomm and Ravikumar, 1992;Blankenau, 2005;Angelopoulos et al, 2011).…”

Section: The Householdsupporting

confidence: 56%

Growth and welfare effects of environmental tax reform and public spending policy

Oueslati

2015

Economic Modelling

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Section: The Householdsupporting

confidence: 56%

Growth and welfare effects of environmental tax reform and public spending policy

Oueslati

2015

Economic Modelling

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“…Similarly, the negative impact of DETR on TFP growth remains confirming once again the distortionary character of taxation for productivity performance. This result suggests that lower corporate tax rate can improve firm productivity which corroborates the finding in the tax structure literature that substantial welfare gains can be obtained from tax reforms that decrease the capital tax rate relative to the labour/consumption tax rates (see Angelopoulos et al, 2012).…”

supporting

confidence: 86%

Measuring Firm-Level Productivity Convergence in the UK: The Role of Taxation and R&D Investment

Bournakis¹,

Mallick

Kernohan³

et al. 2013

SSRN Journal

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This paper examines the direct effects of corporate tax on firm productivity along with the interaction effects of tax policy and R&D activity on productivity at firm level for over 13,062 firms during 2004-2011. Our main findings are first, that there is evidence for productivity convergence and we find that there is a positive robust relationship between R&D and firm productivity, whereas tax policy has a negative distortionary effect on TFP. Second, firms with greater export orientation do not seem to achieve much improvement in productivity, whereas the favourable productivity effect in the case of R&D-based firms suggests that if there are tax incentives in place for R&D type activity, it can promote innovation and drive productivity convergence (lagging firms closing the technology gap with those at the frontier), particularly so when there is a continued decline in overall economic activity. The results also show a significant non-linear effect of tax rate on firm-level productivity, identifying an inverse U-shaped relationship. Keywords Non-technical summary and policy implicationsThis paper argues that technological innovation is vital to enhancing firm-level productivity or efficiency growth, and thus investment in R&D can play a larger role in determining the differences in productivity across firms and help achieve productivity convergence. During periods of general economic slowdown, corporate tax policy may drive such innovation and therefore the paper examines the direct effects of corporate tax on firm productivity along with the interaction effects of tax policy and R&D activity on productivity at firm level for over 13,062 firms during 2004-2011. Our main findings are first, that there is evidence for productivity convergence and we find that there is a positive robust relationship between R&D and firm productivity, whereas tax policy has a negative distortionary effect on TFP. Second, firms with greater export orientation do not seem to achieve much improvement in productivity, whereas the favourable productivity effect in the case of R&D-based firms suggests that if there are tax incentives in place for R&D type activity, it can promote innovation and drive productivity convergence (lagging firms closing the technology gap with those at the frontier), particularly so when there is a continued decline in overall economic activity. The results also show a significant nonlinear effect of tax rate on firm-level productivity, identifying an inverse U-shaped relationship with a threshold level of around 45% as the optimum productivity-enhancing effective tax rate.

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“…For instance, there is a rich literature on the implications of changes in the tax mix given spending (see e.g. Lucas, 1990, Cooley and Hansen, 1992, McGrattan, 1994, Altig et al, 2001, and House and Shapiro, 2006, for the US, and Angelopoulos et al, 2012, for the UK). Here, we focus on a smaller size of the public sector and the choice of the public financing instrument.…”

Section: Introductionmentioning

confidence: 99%

Smaller Public Sectors in the Euro Area: Aggregate and Distributional Implications

Economides

Papageorgiou²,

Philippopoulos

et al. 2012

CESifo Economic Studies

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In this paper, we study the aggregate and distributional implications of a smaller public sector in the euro area. By a smaller public sector, we mean a reduction in public debt and/or cuts in public spending, when such changes in fiscal policy are accommodated by adjustment in various taxes. Aggregate implications have to do with per capita output and welfare, while distribution refers to differences in income and welfare between private and public sector employees. We solve the model numerically using fiscal data from the euro area and then do a number of policy experiments. The general message is that the issue is not just a smaller public sector, but also the spending-tax mix chosen. Terms of use: Documents in EconStor mayJEL-Code: H100, H300, H200.

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Tax structure, growth, and welfare in the UK

Cited by 24 publications

References 31 publications

Growth and welfare effects of environmental tax reform and public spending policy

Growth and welfare effects of environmental tax reform and public spending policy

Measuring Firm-Level Productivity Convergence in the UK: The Role of Taxation and R&D Investment

Smaller Public Sectors in the Euro Area: Aggregate and Distributional Implications

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