Samara Gunter, Daniel Riera-Crichton, Carlos Vegh, Guillermo Vuletin, 01 May 2019

Based on evidence from the industrial world, and particularly Europe, tax hikes have a significant negative effect on economic activity. The column shows that this empirical finding does not hold for a broader sample. In the developing world, higher taxes may be an effective way to raise revenues without reducing GDP. This is especially true in countries with low provision of public goods or commodity-dependent countries.

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