Although the relationship between taxation and general economic activities and economic growth is frequently studied, the results, in general, differ depending on the country, the time period, the tax structure, whether it is based on a model and the estimation method used. This study examines the effects of the tax structure on labor productivity based on a Cobb-Douglas type production function under the assumption of Harrod-neutral technological progress by using unrestricted and restricted error correction models The estimates for the period 1980-2017 in the case of Turkey show that the long term elasticities of the labor productivity with respect to the tax structure indicators are significantly positive but mostly inelastic. Taxation firstly increases the labor productivity growth and decreases it in the short-run irrespective of the tax structure indicators. The results also show that there is no strong evidence on a causal relationship from the tax structure indicators to economic growth.
Key words: Tax Structure; Fiscal Policy; Economic Growth; Bounds Testing; ARDL, Causality. JEL Codes: C22, E62, H20, H30. Article Language: EnglishTurkish
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