How is Tax Policy Conducted over the Business Cycle? / Carlos A. Vegh, Guillermo Vuletin.

Format:

Book

Author/Creator:

Vegh, Carlos A.

Contributor:

National Bureau of Economic Research.

Vuletin, Guillermo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17753.

NBER working paper series no. w17753

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

It is well known by now that government spending has typically been procyclical in developing economies but acyclical or countercyclical in industrial countries. Little, if any, is known, however, about the cyclical behavior of tax rates (as opposed to tax revenues, which are endogenous to the business cycle and hence cannot shed light on the cyclicality of tax policy). We build a novel dataset on tax rates for 62 countries for the period 1960-2013 that comprises corporate income, personal income, and value-added tax rates. We find that, by and large, tax policy is acyclical in industrial countries but mostly procyclical in developing countries. Further, tax policy in countries with better institutions and/or more integrated with world capital markets tends to be less procyclical/more countercyclical.

Notes:

Print version record

January 2012.