Explaining output volatility: The case of taxation

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This paper presents strong empirical evidence that the observed heterogeneity of output volatility across countries and over time is partly endogenous. In particular, based on a closed-form solution we obtain a (long-run) equilibrium relationship between taxes and output volatility in the stochastic neoclassical growth model by showing that asymptotically the variance of output growth rates is affected by the level of taxes, without affecting the mean. We estimate the tax semi-elasticities on output volatility and provide convincing empirical evidence that taxes are important to understand differences in output volatility among OECD countries.
OriginalsprogEngelsk
TidsskriftJournal of Public Economics
Vol/bind95
Nummer11-12
Sider (fra-til)1589-1606
Antal sider18
ISSN0047-2727
DOI
StatusUdgivet - 2011

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