Title: A note on taxation and economic growth nexus

Authors: Constantina Kottaridi; Michael Polemis

Addresses: Department of Economics, University of Piraeus, Piraeus, Greece; Hellenic Open University, Patras, Greece; Open University Cyprus, Cyprus ' Department of Economics, University of Piraeus, Piraeus, Greece; Hellenic Competition Commission, Athens, Greece; Hellenic Open University, Patras, Greece; Open University Cyprus, Cyprus

Abstract: We examine the relationship between taxation and economic growth using several tax variables for a sample of OECD economies over the period 1980-2020. Our dynamic panel GMM threshold model follows the spirit of Seo and Shin (2016), hence we can trace nonlinearities in the taxation-growth nexus following recent theoretical developments. We unmask a statistically significant inverted 'U-shaped' relationship between effective tax rates and economic growth justifying a more efficient reformulation of public policy toward tax reforms. Further, the mixed evidence surrounding the effects of different tax indicators suggests that a one-size-fits-all approach may not be effective. Instead, tailored tax policies that account for the unique economic contexts of different countries, especially within the OECD framework, could lead to more effective economic outcomes.

Keywords: taxation; threshold analysis; nonlinear effects; dynamic panel GMM; OECD.

DOI: 10.1504/IJCEE.2026.151002

International Journal of Computational Economics and Econometrics, 2026 Vol.16 No.1/2, pp.92 - 105

Received: 28 Jun 2024
Accepted: 07 Oct 2024
Published online: 08 Jan 2026 *

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