Jump to ContentJump to Main Navigation
Show Summary Details

Review of Economic Perspectives

Národohospodárský obzor; The Journal of Masaryk University

4 Issues per year


SCImago Journal Rank (SJR) 2015: 0.143
Source Normalized Impact per Paper (SNIP) 2015: 0.273
Impact per Publication (IPP) 2015: 0.121

Open Access
Online
ISSN
1804-1663
See all formats and pricing
Volume 16, Issue 2 (Jun 2016)

Issues

Economic Growth and Budget Constraints: EU Countries Panel Data Analysis

Petr Zimčík
  • Masaryk University, Lipová 41a, Brno, Czech Republic
  • Email:
Published Online: 2016-06-28 | DOI: https://doi.org/10.1515/revecp-2016-0007

Abstract

The aim of this paper is to identify the impacts of different taxes and expenditures on economic growth. The research is focused on 20 selected European Union Member States. These countries are equally divided into four groups based on their average tax burden as presented in the World Tax Index. A comparison of fiscal attributes among these groups is important for the analysis. Annual government finance data from the years 1995 to 2012 are used for an empirical study. The indicators observed are real GDP change, the composition and volume of total government expenditures, tax quotas of individual taxes and total budget balance. These indicators are used within an endogenous growth model together with capital stock and an approximation of human capital. A panel regression with fixed effects is used as an analytic tool. The main results are that an increase in social contributions, property, production and personal income tax quotas has an adverse effect on economic growth.

Keywords : Economic Growth; EU; Taxation; Government Expenditures; Panel Data

References

  • AFONSO, A., and D. FURCERI. (2008). Government Size, Composition, Volatility and Economic Growth. ECB Working paper No. 849.

  • AGELL, J., T. LINDH and H. OHLSSON. (1997). Growth and the public sector: A critical review essay, European Journal of Political Economy Vol. 13, pp. 33-52.

  • ALESINA, A., and R. PEROTTI. (1996). Fiscal Adjustments in OECD countries: composition and macroeconomic effect. NBER Working paper 5730.

  • ALESINA, A., and R. PEROTTI. (2009). Large changes in fiscal policy: taxes versus spending. NBER Working paper 15438.

  • ARDANGA, S. (2001). Fiscal Policy Compostition, Public Debt, and Economic Activity. Public Choice, Vol. 109, pp. 301-325. DOI: 10.1023/A:1013021004195 [Crossref]

  • ARNOLD, J., B. BRYS, CH. HEADY, C. JOHANSSON, C. SCHWELLNUS, and L. VARTIA. (2011). Tax Policy For Economic Recovery and Growth, The Economic Journal, Vol. 121, pp. 59-80. DOI: 10.1111/j.1468-0297.2010.02415.x [Web of Science] [Crossref]

  • BARRO, R. (1990). Government spending in a simple model of endogenous growth. Journal of Political Economy, Vol. 98, pp. 103-117. DOI: 10.1086/261726 [Crossref]

  • BERGH, A., and M. KARLSSON. (2010). Government Size and Growth: Accounting for Economic Freedom and Globalization. Public Choice. Vol. 142, No. 1/2, pp. 195-213. DOI: 10.1007/s11127-009-9484-1 [Web of Science] [Crossref]

  • BLEANEY, M., N. GEMELL, and R. KNELLER. (2001). Testing the Endogenous Growth Model: Public Expenditure, Taxation, and Growth ove the Long Run. The Canadian Journey of Economics 34, pp. 36-57. DOI: 10.1111/0008-4085.00061 [Crossref]

  • BORYS, P., P. CIZKOWITZ and A. RZOŃCA (2014). Panel Data Evidence on the Effects of Fiscal Policy Shocks in the EU New Member States, Fiscal Studies,Vol. 35, No. 2, pp. 189-224. DOI: 10.1111/j.1475-5890.2014.12028.x [Web of Science] [Crossref]

  • DALIC, M. (2013). Fiscal policy and growth in new member states of the EU: A panel data analysis. Financial theory and practice.

  • DAR, A. and S. AMIRKHALKHALI (2002). Government Size, Factor Accumulation, Total Factor Productivity and Economic Growth: Evidence from OECD Countries. Journal of Policy Modeling. pp. 679-692. DOI: 10.1016/S0161-8938(02)00163-1 [Crossref]

  • GEMMELL, N., and J. AU (2013). Government size, fiscal policy and the level and growth of output: A review of recent evidence, Journal of the Asia Pacific Economy, Vol. 18, No.2, pp: 203-229 DOI: 10.1080/13547860.2013.777535 [Crossref] [Web of Science]

  • GWARTNEY, J., R. LAWSON, and R. HOLCOMBE. (1998). The size and functions of government and economic growth. Joint Economic Committee,Vol. 5.

  • HAGEN, J., A. HALLET, and R. STRAUCH. (2002). Budgetary Consolidation in Europe: Quality, Economic Conditions, Persistence. Journal of the Japanese and International Economies, Vol. 16, pp. 512-535. [Crossref]

  • IRMEN, A., and J. KUEHNEL. (2009). Productive Government Expenditure and Economic Growth. Journal of Economic Surveys, Vol. 23, pp. 692-733. DOI: 10.1111/j.1467-6419.2009.00576.x [Crossref] [Web of Science]

  • KNELLER, R., M. BLEANEY, and N. GEMELL. (1999). Fiscal Policy and growth: evidence from OECD countries. Journal of Public Economics, Vol. 74, pp. 171-190. DOI: 10.1016/S0047-2727(99)00022-5 [Crossref]

  • LEVIN, A., C. LIN, and C. CHU. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties. Journal of Econometrics, Vol. 108, pp. 1-24. DOI: 10.1016/S0304-4076(01)00098-7 [Crossref]

  • MACHOVÁ, Z., and I. KOTLÁN. (2013). World Tax Index: New Methodology for OECD Countries, 2000-2010. DANUBE: Law and Economics Review, Vol. 4, 165-179. DOI: 10.2478/danb-2013-0008 [Crossref]

  • MACHOVÁ, Z., and I. KOTLÁN. (2014a). Do taxes matter for long-run growth? Still an actual problem of fiscal policy, Actual Problems of Economics, No. 7,pp. 418-428.

  • MACHOVÁ, Z., and I. KOTLÁN. (2014b). Expenditures on Collective and Individual Services: Discussion on the Classification of Government Expenditures with Regard to their Inclusion into Growth Models. Law and Economics Review, Vol. 5, pp. 287-296. DOI: 10.2478/danb-2014-0016 [Crossref]

  • PETRU-OVIDIU, M. (2015). Tax composition and economic growth. A panel-model approach for Eastearn Europe. Economy Series, Vol. 2, pp. 89-101

  • SCHNEIDER, F. (2014). In the Shadow of the State - the Informal Economy and Informal Economy Labor Force. Law and Economics Review, Vol. 5, pp. 227-248. DOI: 10.2478/danb-2014-0013 [Crossref]

  • SHINOHARA, M. (2014). Tax Structure and Economic Growth - A Survey of Empirical Analyses, Institute of Economic Research Chuo University, Discussion Paper No.217.

  • SURUGIU, M., and C. SURUGIU. (2012). Tax competition, harmonization and development: Challenges and consequences. Argumenta Oeconomica, Vol.1, pp. 139-154

  • WOLSWIJK, G. (2009). Causality Between Government Revenues and Spending in Europe. The Icfai University Journal of Public Finance, Vol. 7, pp. 6-24.

  • ZAGLER, M., and G. DÜRNECKER. (2003). Fiscal Policy and Economic Growth. Journal of Economic Surveys, Vol. 17, pp. 397-418. DOI: 10.1111/1467-6419.00199 [Crossref]

About the article

Received: 2015-07-16

Revised: 2016-06-16

Accepted: 2015-11-26

Published Online: 2016-06-28

Published in Print: 2016-06-01


Citation Information: Review of Economic Perspectives, ISSN (Online) 1804-1663, DOI: https://doi.org/10.1515/revecp-2016-0007. Export Citation

© by Petr Zimčík. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License. (CC BY-NC-ND 4.0)

Comments (0)

Please log in or register to comment.
Log in