REM WORKING PAPER SERIES
Optimal Tax Structure for Consumption and Income Inequality: an
Empirical Assessment
António Afonso, José Alves
REM Working Paper 051-2018
October 2018
REM – Research in Economics and Mathematics
Rua Miguel Lúpi 20,
1249-078 Lisboa,
Portugal
ISSN 2184-108X
Any opinions expressed are those of the authors and not those of REM. Short, up to
two paragraphs can be cited provided that full credit is given to the authors.
Optimal Tax Structure for Consumption and Income
Inequality: an Empirical Assessment✯
António Afonso❸, José Alves❹
2018
Abstract
In the present empirical analysis, we try to assess the impact of taxation on investment
growth. In particular, and by using gross fixed capital formation as a proxy for investment,
we intend to evaluate the impact of the taxation structure in investment dynamics, in a
short and a long-run perspectives. This empirical exercise was conducted for all OECD
countries, during the 1980-2015 period. Through panel data econometric techniques,
we find optimal tax-investment threshold values, especially higher for short-term than for
long-term horizon. In addition, we find optimal income taxation around 9%, in percentage
of GDP, an average optimal value of 12.7% for consumption taxes to promote annual
investment growth.
Keywords: Investment Growth; Tax systems; Fiscal Policy; Optimal taxation
JEL: D25; E62; H21; O47
✯ The
opinions expressed herein are those of the authors and do not necessarily reflect those of their employers.
Any remaining errors are the author’s sole responsibility.
❸ ISEG/UL - Universidade de Lisboa, Department of Economics; REM - Research in Economics and Mathematics, UECE - Research Unit on Complexity and Economics. UECE is supported by FCT (Fundação para a
Ciência e a Tecnologia, Portugal). email: aafonso@iseg.utl.pt.
❹ ISEG/UL - Universidade de Lisboa, Department of Economics; REM – Research in Economics and Mathematics, UECE – Research Unit on Complexity and Economics. UECE is supported by FCT (Fundação para
a Ciência e a Tecnologia, Portugal) Corresponding author: jose.borges.alves@phd.iseg.ulisboa.pt.
1
1
Introduction
The act to consume is the main purpose of economics. Yet, consumption is made essentially
through economic markets, which can lead to several economic disruptions, namely, the noninclusion of several externalities (positive and negative) and an inefficient income distribution
of the financial resources spent.
In order to correct those disruptions, governments tend to use taxation as a key instrument.
Several sources of taxation, such as on individual income and property, can lead to a reduction
on income inequalities, as mentioned by Piketty (2014). Furthermore, some studies, as Mo
(2000), Cingano (2014) and Ostry et al. (2014), highlight the positive linkage between income
inequality reduction and economic performance.
Therefore, it is important to analyse the relationship between taxation structures and both
consumption and income inequalities. The study of these two aspects allows to understand
if fiscal policy indeed contributes to higher consumption and to lower inequalities, in what
concerns the use of tax policies.
In our panel analysis for the period between 1980 and 2015, for OECD countries, we find
some non-linear relationships between several tax items and the two above-mentioned variables,
while uncovering also the respective optimizing thresholds.
The paper is structured as follows: section 2 reviews the literature regarding taxation effects
on both consumption and income inequality; section 3 presents the methodology employed, as
well as the data; section 4 reports and discusses the results; and lastly, section 5 provides our
conclusions.
2
Literature Review
Taxing income may obviously have important consequences on consumption, income and
wealth inequalities dynamics. As Piketty and Saez (2003) highlight, the existence of progressive
income and estate tax systems for the United States case have prevented a rapid recovery of
the wealth inequalities after the Great Depression and WWII.
In fact, and in what concerns the taxation effects on inequality, Saez (2004) concludes that
both short and long-term direct and progressive taxation is crucial for distributional purposes.
However, the author highlights that indirect taxes can complement the effect of direct taxation
in the short-run for the reduction of inequalities. The difference between the short and longterm arises, mainly from the assumption that individuals only adjust the labour supply in the
short-term.
Moreover, Duncan and Sabirianova Peter (2016) agree with Saez (2004). By assessing
the impact of progressivity changes in income tax systems and the effect of those changes on
income inequality degree, the authors found a positive relationship between the increase in tax
progressivity and the decrease in income inequality. However, the authors highlight the inverse
nexus between tax progressivity and efficiency cost in revenues collection.
Additionally, in accordance with previous studies, Clark and Lawson (2008) also find that
a higher degree of government interventionism on the economy is counter-productive for redistribution objectives. On the other hand, Adam et al. (2015) verify that, for a 75 sample of
both developed and developing countries, high-income inequality countries rely more on capital
taxes and, consequently, hamper both investment and economic growth. Iosifidi and Mylonidis
(2017) assess the effects of capital, labour income and consumption taxes for redistribution
purposes. The authors find that increases in labour income and consumption taxes prevent the
reduction of inequality. Although, and for redistributive purposes it is preferable to levy taxes
on labour than on consumption.
1
On the other hand, Islam et al. (2017) study the impact of income inequality on the personal
income tax-to-GDP ratio. The analysis, conducted for 21 OECD countries for more than 140
years, reveals stronger effects of a decrease in the income taxation proportion on GDP revenues
on an increase of income inequalities. In fact, the authors found a long-run elasticity of income
tax to the Gini index of almost -1.00, approximately. In addition, Yi (2012) introduces the
effect of the political system on income disparities, and finds that high levels of taxation can
emphasize the democratization process, even with a higher degree of inequality.
Regarding the impact of taxation on consumption, several studies found a negative relationship between taxation and consumption, namely Blanchard and Perotti (2002), and Mountford
and Uhlig (2009), among others. More specifically, Romer and Romer (2010) analyses the exogenous tax increase on three type of consumption items for the United States case after WWII
until the first decade of the XXI century. They conclude that different types of consumption respond heterogeneously to a tax increase. Yet, while consumption on both non-durables goods
and services decreases after a tax increase, the consumption on durable goods reacts more
drastically to a tax growth (Carmignani (2008)).
In particular, Blanchard and Perotti (2002) show that, for the U.S. economy after WWII
until the 1997, a tax increase leads to a reduction in all private consumption components (a
1% increase in taxes implies a reduction of 0.36% in the private consumption-to-GDP ratio).
Alm and El-Ganainy (2013) highlight the detrimental effect of VAT on consumption. In fact,
the analysis conducted for 15 European countries between 1961 and 2015 period shows that
an increase in 1% of VAT decreases private consumption, between 0.04% and 0.21%, in the
short-run, and 0.26% to more than 1% in the long run.
3
Methodology and Data
We consider that aggregate consumption C = F (T ) and inequality Ineq = F (T ) are functions of taxation, where C represents the households’ consumption, as a share of GDP, Ineq,
is the degree of income inequalities, and F (T ) a function of taxation structure represented
generically by the set T . Those relations are formalised, for consumption and inequalities, in
equation 1:
Yi,t = αi,t + β0,i,t yi,t−1 +
X
βt,it τt + βi xi,t + νi + ηt + εi,t , t = 1, ..., T, i = 1, ..., N
(1)
where Y = {Ci,t , Ineqi,t }, Ci,t is household final consumption expenditures, in percentage of
GDP, Ineqi,t the income inequalities among individuals, yi,t−1 is the one-lag real per capita
GDP, τt represents each tax item’s revenue, in proportion of GDP, while xi,t is an independent
variable belonging to the control variables set, νi and ηt are the country and time-specific effects,
respectively, and εi,t is the error term of the white noise-type.
Additionally, we introduce a squared term for each tax component to evaluate the existence
of non-linearity effects of tax structure on household’s consumption and income inequalities as:
Yi,t = αi,t +β0,i,t yi,t−1 +
X
β1,i,t τt +
X
β2,i,t τt2 +βj xi,t +νi +ηt +εi,t , t = 1, ..., T, i = 1, ..., N (2)
If we derive 2with respect to each tax items we obtain:
∂Yi,t
∂(αi,t + β0,i,t yi,t−1 +
=
2
∂(τi,t , τi,t )
P
P
β1,i,t τt + β2,i,t τt2 + βi xi,t + νi + ηt + εi,t )
2
∂(τi,t , τi,t
)
2
(3)
Each tax threshold is then computed by equalizing the equation (3) to zero, as shown in
equation (4)
0 = β1 + 2β2,i,t τt ⇔ τt =
−β1,i,t
2β2,i,t
(4)
Therefore, if we obtain a significant negative estimate for β2,i,t a concave relationship between the tax item and the dynamic of the dependent variable, meaning that a tax item can
maximize household consumption or increase income inequalities. On the contrary, if we get an
estimated positive coefficient for β2,i,t we conclude for a convex relationship. Therefore, the tax
item threshold value can minimize household consumption, in percentage of GDP, or guarantee
a reduction in income inequalities.
The model is estimated for a period between 1980 and 2015 and for the OECD countries:
Australia (AUS), Austria (AUT), Belgium (BEL), Canada (CAN), Chile (CHL), Czech Republic (CZE), Denmark (DNK), Estonia (EST), Finland (FIN), France (FRA), Germany (DEU),
Greece (GRC), Hungary (HUN), Iceland (ISL), Ireland (IRL), Israel (ISR), Italy (ITA), Japan
(JPN), South Korea (KOR), Latvia (LVA), Luxembourg (LUX), Mexico (MEX), the Netherlands (NLD), New Zealand (NZL), Norway (NOR), Poland (POL), Portugal (PRT), Slovak
Republic (SVK), Slovenia (SVN), Spain (ESP), Sweden (SWE), Switzerland (CHE), Turkey
(TUR), United Kingdom (GBR) and United States (USA).
Regarding the set of exogenous and control variables we have: GDP based on purchasingpower-parity (PPP) per capita GDP (realgdppc) in thousands, output gap in percent of potential
GDP (outputgap), and government debt-to-GDP ratio, which are all sourced from World Economic Outlook (IMF). In addition, taxes on income, profits and capital gains of individuals
(taxinc), taxes on income, profits and capital gains of corporates (taxfirms), social security contributions (ssc), taxes on payroll and workforce (taxpayroll ), taxes on property (taxprop), taxes
on goods and services (taxvat), gross fixed capital formation (gfcf ), current account balance in
GDP ratio (current), average hours worked (avg) and unemployment rates (unem) are from
OECD.Stats database.
Furthermore, we also consider additional variables as the deposit interest rate (depositrate),
net foreign direct investment-to-GDP ratio (foreigninvestment), the GDP percentage of household final consumption expenditure (hconsggdp) and old age dependency ratio, old (ageratioold )
data were retrieved from the World Development Indicators (WDI).
From the Government Finance Statistics, we used data on the functional classification of
government spending, specifically, government expenditures on general public services (pubser ),
on defense (def ), on public order & safety (pubor ), on economic affairs (eco), on environment
protection (env ), on housing & community amenities (hou), on health (hea), on recreation,
culture, & religion (cul ), on education (edu), and on social protection (socpro). Moreover, we
construct two variables based on functional public spending: (i) the so-called productive public
expenditures (proexp), resulting from the sum of public spending related with public services,
defense, public order & safety, economic affairs, environment protection, housing & community
amenities, health, and education, and unproductive public expenditures (unproexp), calculated
through the sum of recreation, culture, & religion and social protection expenditures.
Based in Feenstra et al. (2015) data, we also use data for population in millions (pop), the
real total factor productivity (rtfpna), and human capital index, based on years of schooling
and returns to education (hc).Finally, we take the liquid liabilities-to-GDP ratio (llgdp) is based
on International Financial Statistics (IFS), IMF, and Gini index of inequality in equivalized
household disposable income (ginidisp) is based in Solt (2016). The table 1 presents summary
statistics for each variable1 .
In the empirical analysis we used panel data techniques, namely by applying OLS, OLS1
For reasons of parsimony, the results of realgdppc are expressed in thousands of USD.
3
Fixed Effects (FE), Generalized Method of Moments (GMM) and Robust Least Squares (RLS)
approaches. The estimations are run through the white diagonal co- variance matrix assumption, except for RLS. In addition, we estimate equation 1 for the short and long run consumption
and inequalities, this last by applying a 5-year average for the respective dependent variables.
Regarding the analysis, tax items threshold values will only be discussed when the tax items’
coefficients have statistical significance for both linear and non-linear tax regressors, for at least
a 90% confidence interval.
Table 1
4
4.1
Results
Short-run impacts of taxation structure on aggregate consumption and inequality dynamics.
Regarding the short-term analysis, the results of tax items’ impact on household aggregate
consumption, presented in table 2, show a non-significant effect of both types of public expenditures (productive and unproductive) and investment decisions. On the other hand, while
the population and public debt growth support household consumption, the current account
balance, money supply and the output gap jeopardize private consumption.
With respect to the linear effects of taxation on consumption, through equations (1), (3),
(5) and (7), there are little evidences for tax items effects on households’ consumption decisions,
with the exception for taxes on firms, payroll and workforce, and property taxation. Those tax
items depict a negative correlation with household consumption.
However, considering a non-linear relationship between taxes and consumption, the results
led us to conclude for the existence of a two-tax item threshold: one for taxes on payroll and
workforce and another one for firm’s taxation. More specifically, there is a minimizing threshold
value of 1.44% for payroll taxes, and a 5.67% maximizing threshold value for taxes on firm’s
income with respect to household consumption.
Table 2
On the other hand, and by analysing income inequality and the tax structure in the shortrun, the results presented in table 3 show a non-conclusive effect of income, payroll and property
taxation vis-à-vis income inequalities. However, a raise in the ratio of tax on firms-to-GDP
seems to be beneficial to reduce inequality. We can draw the same conclusions for a raise in
social security contributions, while a raise in taxation of consumption of goods and services
has a positive and expected signal by worsening the gap between the richest and the poorest
individuals in the countries’ sample.
In addition, the increase of average hours worked, unemployment rate, population and total
factor productivity hampers income equality. On the other hand, a raise in human capital,
public expenditures on health, environment, economic affairs, education and social protection
contributes to decrease inequalities. All the other public expenditure items seem to be detrimental for a better distribution of income.
In what respects the existence of tax items thresholds, we find optimal non-linear results
for all tax sources. In particular, income taxes and consumption on goods and services taxes
show maximizing average values of 7.19% and 11.88% of GDP, respectively. Therefore, those
values maximize the gap between different income individuals. In addition, we also uncover
minimizing values for all the other tax items: an average value of 7.46% for taxes on firms,
15.51% for social security contributions, and lastly, a mean value of 1.01% and 1.56% for taxes
on payroll and workforce and on property, respectively.
4
Table 3
4.2
Long-run impacts of taxation structure on aggregate consumption and inequality dynamics.
From a long-run perspective, and regarding tax items effects on households’ consumption,
our results (presented in table 4) led us to conclude for a positive linear effect of raising revenues from taxes on goods and services, in percentage of GDP, while increasing revenues from
taxes on firms’ income and social security contributions seems to be detrimental for aggregate
consumption Moreover, social contribution is the most harmful tax-item for households’ consumption. In in specific, an increase of 1% of this tax-item revenue, as percentage of GDP
implies a reduction of 0.3%, approximately, of household’s final consumption.
Looking at the effects of the control variables on households’ consumption, we conclude
for a negligible influence of both types of government expenditures. In addition, productive
government spending, population growth, human capital, government debt, unemployment and
deposit rates boost aggregate household consumption. Moreover, we conclude for consumption
reduction when the current account balance improves and when there is an increase in money
supply.
Regarding the non-linear tax effects analysis on households’ consumption, we only find tax
items threshold values for taxes on payroll and social security contribution. While we find a
minimizing value of 1.30% for payroll taxes, as a percentage of GDP, we find both maximizing
and minimizing optimal values for social security contributions. Regarding this last tax item,
although the results show a minimizing value of 9.50% we also achieve a maximum value of
11.80%. Therefore, we can conclude for an optimal interval of this tax to promote, or not,
household consumption.
Table 4
The long-run analysis of taxation structure on income inequalities shows a similar pattern as
the one observed in the short-run analysis for non-linear connections between tax structures
and household income gaps (see table 5). For income taxation and taxes on consumption of
goods and services, we find average maximizing values of 6.94% and 11.83%, respectively and
on average, meaning that those tax items, in GDP proportion, enhance income disparities. On
the other hand, we find mean minimizing values of 7.80% for firm’s taxation, 15.51% for social
security contributions, and mean values of 1.00% and 1.53% for payroll and property taxes,
respectively, which reduces the Gini index coefficient. In terms of the linear relationships, we do
not conclude for a clear pattern for individual income taxes and payroll and workforce taxation.
Furthermore, and as it is recognized by the literature, an increase in the GDP proportion of
consumption taxes is associated with a higher degree of inequalities. Beyond the effect of
this tax source, our results also show that higher old-age dependency ratios favour inequality
growth. On the other hand, an increase in investment, through gross fixed capital formation
and in human capital, a higher government spending related to social protection and education,
among other factors support the political goals of reducing income inequalities.
Table 5
5
Concluding Remarks
In this paper, we have studied the tax structure impacts on both household aggregate
consumption and income inequalities.
5
Through a panel set up, we analyse both short and long-term impacts of taxation structure
and the effects on consumption, and find that while there are little non-linear relationships
between taxes and consumption, all the considered tax items impact on household income
disparities. In particular, and regarding households’ consumption, we only find a minimizing
threshold value for payroll taxes, in a short and long run perspective, while we find a thresholds
interval for social security contribution only for long-term. In addition, we uncover both minimizing and maximizing optimum values of each tax item that affects household consumption.
In terms of the tax items effects on the Gini index dynamics, we find minimizing effects on
income disparities for firms’ taxation, social security contributions and payroll and property
taxes, while consumption and personal income taxes seem to increase income gaps. The possible
surprising effect of income taxation as a negative factor for income disparities may have to do
with the fact of an inefficient progressive tax system, taxing several individual income sources
in different ways that increase income inequalities. Table 6 summarizes the several tax items
thresholds that we found in our analysis.
Table 6
References
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and Public Finance, 20(1):105–128.
Blanchard, O. and Perotti, R. (2002). An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output. The Quarterly Journal of
Economics, 117(4):1329–1368.
Carmignani, F. (2008). The impact of fiscal policy on private consumption and social outcomes
in Europe and the CIS. Journal of Macroeconomics, 30(1):575 – 598.
Cingano, F. (2014). Trends in income inequality and its impact on economic growth. OECD
Social, Employment and Migration Working Papers 163.
Clark, J. R. and Lawson, R. A. (2008). The Impact of Economic Growth, Tax Policy and
Economic Freedom on Income Inequality. The Journal of Private Enterprise, 24(1):23–31.
Duncan, D. and Sabirianova Peter, K. (2016). Unequal inequalities: Do progressive taxes reduce
income inequality? International Tax and Public Finance, 23(4):762–783.
Feenstra, R. C., Inklaar, R., and Timmer, M. P. (2015). The Next Generation of the Penn
World Table. American Economic Review, 105(10):3150–3182.
Iosifidi, M. and Mylonidis, N. (2017). Relative effective taxation and income inequality: Evidence from OECD countries. Journal of European Social Policy, 27(1):57–76.
Islam, M. R., Madsen, J. B., and Doucouliagos, H. (2017). Does inequality constrain the power
to tax? Evidence from the OECD. European Journal of Political Economy.
Mo, P. H. (2000). Income Inequality and Economic Growth. Kyklos, 53(3):293–315.
Mountford, A. and Uhlig, H. (2009). What are the effects of fiscal policy shocks? Journal of
Applied Econometrics, 24(6):960–992.
Ostry, J. D., Berg, A., and Tsangarides, C. G. (2014). Redistribution, Inequality, and Growth.
Staff Discussion Notes 14/02, International Monetary Fund.
6
Piketty, T. (2014). Capital in the twenty-first century. The Belknap Press of Harvard University
Press, London, United Kingdom.
Piketty, T. and Saez, E. (2003). Income Inequality in the United States, 1913-1998. The
Quarterly Journal of Economics, 118(1):1–39.
Romer, C. D. and Romer, D. H. (2010). The Macroeconomic Effects of Tax Changes: Estimates
Based on a New Measure of Fiscal Shocks. The American Economic Review, 100(3):763–801.
Saez, E. (2004). Direct or indirect tax instruments for redistribution: short-run versus long-run.
Journal of Public Economics, 88(3):503 – 518.
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97. SWIID Version 6.1, October 2017.
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Journal of Economic Policy Reform, 15(2):71–92.
7
6
Appendix
Table 1: Summary statistics of the variables set for income, consumption and inequalities,
1980-2015.
Mean
Std dev
Max
Min
Obs.
Mean
Std dev
Max
Min
Obs.
Mean
Std dev
Max
Min
Obs.
Mean
Std dev
Max
Min
Obs.
Mean
Std dev
Max
Min
Obs.
realgdppc
taxinc
taxfirms
ssc
taxpayroll
taxprop
taxvat
24.448
14.313
101.054
2.184
1195
8.820
4.635
26.780
0.873
1106
2.806
1.500
12.594
0.261
1106
8.345
4.981
19.173
0.000
1137
0.369
0.728
5.661
0.000
1137
1.745
1.003
7.334
0.074
1137
10.588
3.046
18.730
2.979
1137
hconsggdp
proexp
unproexp
gfcf
pop
hc
outputgap
56.382
7.069
79.551
29.918
1174
27.536
4.24
48.082
0.537
586
16.71
4.837
28.285
0.000
586
23.161
4.091
39.404
11.546
1174
33.531
52.235
319.449
0.228
1173
3.02
0.435
3.734
1.469
1173
-0.319
2.850
14.911
-11.437
851
debt
llgdp
unem
avg
current
depositrate
rtfpna
55.728
35.901
242.113
3.664
943
72.91
48.689
399.114
6.865
1139
7.349
3.835
27.467
1.854
741
1797.237
249.343
2911
1361.7
986
-0.578
5.565
16.467
-23.201
727
9.253
25.364
682.53
-0.18
1055
0.941
0.123
1.539
0.472
1173
pubser
def
pubor
eco
env
hou
hea
6.703
2.274
16.701
2.980
585
1.681
1.333
8.851
0.000
586
1.698
0.440
3.761
0.815
585
4.760
1.763
25.280
1.307
585
0.689
0.346
1.758
-0.284
583
0.756
0.440
5.411
-0.083
585
5.901
1.686
9.123
0.379
585
cul
edu
socpro
ageratioold
foreigninvestment
gini
1.176
0.570
3.630
0.248
585
5.394
1.080
8.116
3.021
585
15.562
4.708
26.180
5.440
585
20.094
5.519
42.653
6.641
1260
3.645
10.487
252.308
-58.323
1120
30.440
6.562
51.170
18.180
1172
8
Table 2: Linear and non-linear short-run impact results of taxation structure on household
consumption.
OLS
realgdppc−1
taxinc
taxf irms
(4)
(5)
(6)
(7)
(8)
0.000
(0.000)
0.004
(0.033)
0.000
(0.000)
-0.013
(0.130)
0.948***
(0.143)
0.258
(0.927)
0.642
(1.928)
0.093
(0.142)
-0.267
(1.339)
-0.883
(1.249)
0.049
(0.174)
-0.012
(0.094)
-0.003
(0.021)
-0.074
(0.355)
0.003
(0.011)
0.132
(0.598)
0.066
(0.485)
0.000
(0.000)
-0.610
(1.511)
0.046
(0.105)
0.010
(0.674)
-0.008
(0.050)
-0.107
(0.390)
0.017
(0.027)
0.983
(1.950)
-0.492
(0.666)
-3.740
(4.802)
0.628
(0.854)
-1.535
(1.683)
0.072
(0.098)
0.802***
(0.171)
-0.046
(0.129)
-0.210
(0.696)
-0.122
(0.261)
0.726
(1.363)
-2.117
(2.038)
-0.041
(0.137)
0.018
(0.017)
-0.013
(0.009)
0.077
(0.150)
0.002
(0.001)
-0.213
(0.302)
0.361
(0.260)
0.000
(0.000)
0.022
(0.025)
0.552***
(0.061)
-0.051
(0.048)
0.079
(0.054)
-0.012
(0.076)
-4.642
(5.091)
1.835
(1.984)
-0.065
(0.049)
0.008
(0.010)
-0.027***
(0.008)
0.040
(0.048)
0.004
(0.003)
-0.179***
(0.047)
0.073
(0.080)
0.000
(0.000)
-0.130
(0.433)
0.002
(0.021)
-0.204
(0.223)
-0.015
(0.018)
1.785
(1.110)
-0.072
(0.044)
-2.093**
(0.903)
0.728*
(0.389)
1.491
(1.043)
-0.289
(0.200)
1.012
(0.714)
-0.028
(0.029)
0.550***
(0.062)
-0.046
(0.047)
0.074
(0.051)
0.040
(0.077)
-5.121
(5.059)
2.645
(1.680)
-0.069
(0.051)
0.002
(0.010)
-0.022***
(0.008)
0.076
(0.048)
0.008**
(0.003)
-0.172***
(0.050)
0.074
(0.082)
0.000
(0.000)
-0.258
(0.898)
0.861***
(0.036)
0.023
(0.029)
0.051
(0.044)
0.011
(0.055)
0.342**
(0.142)
0.119
(0.272)
-0.098***
(0.036)
0.008**
(0.003)
-0.002
(0.003)
0.007
(0.018)
0.001
(0.001)
-0.160***
(0.038)
0.044
(0.046)
0.000**
(0.000)
-0.108
(0.176)
0.006
(0.010)
0.297
(0.215)
-0.025
(0.016)
-0.060
(0.135)
0.005
(0.008)
0.072
(0.406)
-0.106
(0.162)
-0.251
(0.492)
-0.053
(0.119)
-0.172
(0.455)
0.013
(0.019)
0.861***
(0.035)
0.031
(0.030)
0.029
(0.044)
0.010
(0.070)
0.408***
(0.142)
0.069
(0.388)
-0.108***
(0.038)
0.007*
(0.004)
-0.004
(0.004)
0.018
(0.020)
0.001
(0.001)
-0.168***
(0.041)
0.049
(0.053)
0.873***
(0.024)
0.008
(0.021)
0.034
(0.027)
-0.012
(0.032)
0.340***
(0.117)
-0.127
(0.250)
-0.079***
(0.023)
0.008***
(0.003)
0.000
(0.003)
0.008
(0.018)
0.000
(0.001)
-0.139***
(0.025)
0.066*
(0.037)
0.000*
(0.000)
0.046
(0.147)
-0.001
(0.008)
0.261*
(0.152)
-0.023**
(0.012)
0.014
(0.100)
-0.001
(0.006)
-0.023
(0.360)
-0.021
(0.147)
-0.630
(0.494)
0.076
(0.109)
-0.489
(0.341)
0.026*
(0.014)
0.865***
(0.026)
0.018
(0.022)
0.007
(0.031)
-0.050
(0.040)
0.392***
(0.136)
-0.193
(0.349)
-0.098***
(0.024)
0.005
(0.003)
-0.003
(0.003)
0.011
(0.020)
0.000
(0.001)
-0.16***
(0.027)
0.100**
(0.039)
-
-
-
1.44%
-
-
-
-
5.67%
-
0.984
1.941
244
0.984
1.963
244
0.991
2.145
244
0.992
2.133
244
0.937
1.489
221
0.974
1.755
221
0.768
n.a.
244
0.782
n.a.
244
-0.016
(0.070)
-0.044
(0.053)
ssc
2
-0.158*
(0.088)
taxpayroll
taxpayroll
2
taxprop
-0.277***
(0.088)
taxprop2
taxvat
0.086
(0.102)
taxvat2
hconsggdp−1
proexp
unproexp
gf cf−1
log(pop)
hc
outputgap
debt−1
llgdp
unem
avg
current
depositrate
Tax tresholds
taxinc
taxf irms
ssc
taxpayroll
taxprop
taxvat
R2
DW-stat
Obs.
RLS
(3)
2
ssc
2SLS
(2)
taxinc2
taxf irms
OLS-FE
(1)
-0.393***
(0.139)
0.038
(0.136)
-0.636*
(0.352)
0.151
(0.198)
0.324**
(0.151)
-0.053
(0.425)
-0.439
(1.146)
-0.787
(2.175)
-0.032
(0.763)
-0.748
(2.508)
-0.040
(0.058)
-0.055
(0.036)
-0.044
(0.073)
-0.227***
(0.088)
0.091
(0.076)
Notes: *, ** and *** represent statistical significance at levels of 10%, 5% and 1% respectively. The robust standard errors are in
brackets. The White diagonal covariance matrix is used in order to assume residual heterokedasticity, with the exception for RLS
technique. The DW-statistic is the Durbin-Watson statistic. The non-bold and bold values express, respectively, maximum and
minimum optimal tax items levels.
9
Table 3: Linear and non-linear short-run impact results of taxation structure on household
income inequalities.
OLS
realgdppc−1
taxinc
taxf irms
(4)
(5)
(6)
(7)
(8)
0.000***
(0.000)
-0.099**
(0.049)
0
(0.000)
-0.003
(0.080)
0.004***
(0.001)
0.154***
(0.035)
0.664***
(0.165)
-5.372***
(0.398)
3.797*
(1.961)
-0.532***
(0.083)
1.323***
(0.128)
2.190***
(0.410)
-0.183*
(0.094)
-2.159***
(0.457)
0.620
(0.433)
-0.158
(0.121)
1.270***
(0.485)
-0.689***
(0.170)
-0.265***
(0.049)
0.287***
(0.032)
0.157***
(0.045)
-0.012*
(0.006)
-0.126***
(0.041)
-0.031*
(0.016)
0.000***
(0.000)
0.352***
(0.1000)
-0.020***
(0.004)
-1.759***
(0.252)
0.128***
(0.023)
-0.615***
(0.141)
0.004
(0.01)
-1.681***
(0.599)
0.84***
(0.251)
-3.407***
(0.613)
0.95***
(0.145)
0.518
(0.380)
-0.024
(0.017)
0.004***
(0.001)
0.125***
(0.029)
0.723***
(0.146)
-4.933***
(0.576)
5.994***
(1.775)
-0.444***
(0.078)
1.169***
(0.133)
1.706***
(0.351)
-0.230***
(0.057)
-0.881**
(0.341)
0.850***
(0.280)
-0.298***
(0.097)
0.560*
(0.326)
-0.573***
(0.164)
-0.165***
(0.043)
0.273***
(0.028)
0.129***
(0.034)
-0.007
(0.007)
-0.081**
(0.033)
-0.069***
(0.016)
0.000***
(0.000)
-0.149***
(0.038)
-0.001
(0.002)
0.113***
(0.031)
4.122
(3.758)
-0.862
(1.407)
0.046
(2.133)
0.175***
(0.060)
-0.153
(0.180)
-0.205
(0.247)
-0.047*
(0.027)
-0.141
(0.330)
0.391
(0.295)
0.181
(0.146)
0.594
(0.454)
0.209
(0.215)
-0.271***
(0.066)
0.121**
(0.053)
-0.039
(0.036)
0.001
(0.004)
-0.001
(0.050)
-0.014
(0.018)
0.000***
(0.000)
0.328**
(0.155)
-0.023***
(0.008)
-0.243**
(0.115)
0.01
(0.007)
-1.179***
(0.324)
0.038***
(0.013)
-1.645***
(0.43)
0.795***
(0.199)
-0.587
(0.601)
0.086
(0.119)
0.771***
(0.275)
-0.036***
(0.012)
-0.001
(0.001)
0.111***
(0.018)
5.447***
(1.825)
-0.047
(0.872)
0.071
(1.097)
0.202***
(0.061)
-0.016
(0.145)
-0.298
(0.237)
-0.045
(0.032)
-0.230
(0.270)
0.250
(0.153)
0.107
(0.099)
0.971***
(0.283)
0.207
(0.140)
-0.287***
(0.045)
0.106***
(0.035)
-0.052**
(0.024)
0.000
(0.003)
-0.008
(0.030)
-0.018
(0.016)
0.000***
(0.000)
-0.080
(0.052)
0.004***
(0.001)
0.171***
(0.035)
0.676***
(0.164)
-5.123***
(0.402)
4.161**
(2.029)
-0.537***
(0.084)
1.241***
(0.123)
2.050***
(0.433)
-0.208**
(0.099)
-2.293***
(0.466)
0.600
(0.438)
-0.164
(0.119)
1.122**
(0.486)
-0.663***
(0.178)
-0.284***
(0.048)
0.294***
(0.031)
0.155***
(0.045)
-0.011*
(0.006)
-0.106**
(0.041)
-0.036**
(0.016)
0.000***
(0.000)
0.281***
(0.092)
-0.019***
(0.003)
-1.305***
(0.185)
0.082***
(0.015)
-0.529***
(0.114)
-0.002
(0.008)
-2.029***
(0.573)
1.023***
(0.239)
-2.904***
(0.605)
0.845***
(0.131)
0.862***
(0.320)
-0.033**
(0.016)
0.004***
(0.001)
0.151***
(0.030)
0.856***
(0.162)
-4.277***
(0.556)
5.833***
(2.075)
-0.416***
(0.080)
1.080***
(0.146)
1.614***
(0.418)
-0.260***
(0.088)
-0.957**
(0.416)
0.907**
(0.434)
-0.276**
(0.134)
0.541
(0.511)
-0.445**
(0.188)
-0.198***
(0.060)
0.291***
(0.031)
0.15***
(0.035)
-0.007
(0.005)
-0.061*
(0.035)
-0.053***
(0.014)
0.006***
(0.001)
0.138***
(0.027)
0.479***
(0.116)
-3.696***
(0.308)
-0.690
(1.44)
-0.341***
(0.063)
1.034***
(0.087)
2.597***
(0.281)
-0.233***
(0.053)
-2.959***
(0.303)
0.750***
(0.236)
-0.084
(0.071)
2.276***
(0.254)
-0.781***
(0.133)
-0.290***
(0.035)
0.346***
(0.023)
-0.081***
(0.031)
-0.004
(0.007)
-0.127***
(0.030)
-0.028**
(0.013)
0.000***
(0.000)
0.196***
(0.063)
-0.018***
(0.002)
-0.950***
(0.117)
0.063***
(0.01)
-0.622***
(0.082)
0.002
(0.005)
-1.761***
(0.365)
0.872***
(0.152)
-0.928**
(0.382)
0.392***
(0.088)
1.660***
(0.218)
-0.070***
(0.010)
0.007***
(0.001)
0.125***
(0.019)
0.859***
(0.094)
-2.695***
(0.336)
-1.166
(1.155)
-0.229***
(0.049)
0.868***
(0.078)
0.980***
(0.231)
-0.277***
(0.039)
-0.723***
(0.230)
1.071***
(0.187)
-0.355***
(0.061)
1.849***
(0.201)
-0.335***
(0.108)
-0.157***
(0.029)
0.377***
(0.018)
-0.018
(0.023)
-0.003
(0.005)
-0.030
(0.022)
-0.029***
(0.010)
-
7.39%
7.96%
0.99%
1.72%
13.06%
-
7.13%
15.51%
1.03%
10.71%
-
8.80%
6.87%
1.00%
1.79%
-
-
5.44%
7.54%
1.01%
1.18%
11.86%
0.893
0.351
361
0.932
0.531
361
0.990
0.622
361
0.992
0.763
361
0.894
0.335
360
0.930
0.594
360
0.739
n.a.
361
0.773
n.a.
361
-0.398***
(0.076)
-0.297***
(0.04)
ssc
2
0.668***
(0.162)
taxpayroll
taxpayroll
2
taxprop
-0.135
(0.167)
taxprop2
taxvat
0.005
(0.094)
taxvat2
avg
unem
log(pop)
hc
rtf pna
pubser
def
pubor
eco
env
hou
hea
cul
edu
socpro
ageratioold
depositrate
f oreigninvestment
gf cf
hconsggdp
Tax thresholds
taxinc
taxf irms
ssc
taxpayroll
taxprop
taxvat
R2
DW-stat
Obs.
RLS
(3)
2
ssc
GMM
(2)
taxinc2
taxf irms
OLS-FE
(1)
-0.075
(0.082)
-0.295**
(0.122)
-0.359
(0.407)
-0.083
(0.243)
-0.127
(0.100)
-0.399***
(0.080)
-0.304***
(0.042)
0.621***
(0.163)
-0.326*
(0.187)
-0.085
(0.102)
-0.177***
(0.054)
-0.319***
(0.035)
0.567***
(0.112)
0.337***
(0.124)
0.014
(0.063)
Notes: *, ** and *** represent statistical significance at levels of 10%, 5% and 1% respectively. The robust standard errors are in brackets. The
White diagonal covariance matrix is used in order to assume residual heterokedasticity, with the exception for RLS technique. The DW-statistic is the
Durbin-Watson statistic. The non-bold and bold values express, respectively, maximum and minimum optimal tax items levels.
10
Table 4: Linear and non-linear long-run impact results of taxation structure on household
consumption.
OLS
realgdppc−1
taxinc
taxf irms
(12)
(13)
(14)
(15)
(16)
0.000*
(0.000)
-0.013
(0.030)
0.000
(0.000)
-0.114
(0.102)
0.995***
(0.346)
0.720
(2.478)
1.467
(5.054)
0.206
(0.372)
-0.708
(3.338)
-1.354
(2.958)
0.258
(0.481)
-0.049
(0.245)
0.008
(0.055)
-0.161
(0.910)
0.007
(0.028)
0.488
(1.573)
-0.190
(1.274)
0.000
(0.000)
-2.502
(4.298)
0.176
(0.310)
-0.112
(0.985)
0.000
(0.069)
-0.206
(0.843)
0.050
(0.065)
3.502
(6.256)
-1.383
(2.080)
-9.918
(13.835)
1.706
(2.377)
-2.753
(4.820)
0.161
(0.295)
0.617
(0.479)
-0.134
(0.509)
-1.023
(2.198)
-0.256
(0.737)
2.406
(3.888)
-4.842
(5.854)
-0.009
(0.341)
0.039
(0.045)
-0.014
(0.022)
0.296
(0.4000)
0.002
(0.002)
-0.417
(0.944)
0.599
(0.774)
0.000
(0.000)
-0.043
(0.026)
0.458***
(0.052)
-0.050
(0.038)
0.040
(0.052)
0.031
(0.051)
0.237
(3.451)
4.956***
(1.580)
-0.037
(0.032)
0.009
(0.008)
-0.016**
(0.008)
0.021
(0.036)
0.003
(0.003)
-0.116***
(0.033)
0.200***
(0.073)
0.000
(0.000)
-0.214
(0.475)
0.002
(0.024)
-0.066
(0.220)
-0.015
(0.016)
1.746*
(1.035)
-0.074*
(0.041)
-1.626***
(0.588)
0.624**
(0.260)
0.846
(1.074)
-0.218
(0.210)
0.228
(0.601)
0.008
(0.026)
0.448***
(0.054)
-0.050
(0.039)
0.034
(0.048)
0.070
(0.055)
-1.346
(3.343)
5.76***
(1.785)
-0.041
(0.033)
0.006
(0.009)
-0.013
(0.008)
0.051
(0.038)
0.007**
(0.003)
-0.120***
(0.034)
0.201***
(0.072)
0.000
(0.000)
-0.694
(2.379)
0.802***
(0.031)
0.006
(0.026)
0.026
(0.037)
0.020
(0.043)
0.486***
(0.134)
-0.245
(0.258)
-0.017
(0.031)
0.014***
(0.004)
-0.003
(0.003)
0.042**
(0.020)
0.001
(0.001)
-0.138***
(0.033)
0.121**
(0.049)
0.000***
(0.000)
-0.210
(0.164)
0.013
(0.010)
0.212
(0.181)
-0.022
(0.014)
-0.247**
(0.111)
0.013**
(0.007)
0.492
(0.378)
-0.296*
(0.155)
-1.366**
(0.617)
0.153
(0.133)
-0.263
(0.395)
0.021
(0.017)
0.784***
(0.033)
0.018
(0.026)
-0.017
(0.043)
0.007
(0.051)
0.675***
(0.154)
-0.831**
(0.377)
-0.021
(0.032)
0.014***
(0.004)
-0.003
(0.004)
0.065***
(0.022)
0.002**
(0.001)
-0.146***
(0.033)
0.142***
(0.051)
0.842***
(0.025)
0.003
(0.022)
0.051*
(0.029)
0.040
(0.034)
0.361***
(0.123)
-0.269
(0.262)
0.016
(0.024)
0.011***
(0.003)
-0.001
(0.003)
0.034*
(0.019)
0.000
(0.001)
-0.083***
(0.026)
0.100***
(0.038)
0.000**
(0.000)
-0.116
(0.155)
0.006
(0.009)
0.156
(0.160)
-0.019
(0.012)
-0.137
(0.105)
0.004
(0.006)
0.436
(0.378)
-0.261*
(0.155)
-1.155**
(0.519)
0.163
(0.114)
-0.102
(0.359)
0.011
(0.015)
0.826***
(0.027)
0.013
(0.023)
0.017
(0.033)
0.014
(0.042)
0.477***
(0.143)
-0.566
(0.367)
-0.003
(0.026)
0.012***
(0.003)
-0.002
(0.003)
0.045**
(0.021)
0.001
(0.001)
-0.104***
(0.028)
0.129***
(0.041)
-
9.50%
-
-
11.80%
1.30%
-
-
-
-
-
0.985
1.486
244
0.986
1.534
244
0.993
1.756
244
0.993
1.814
244
0.652
1.266
221
0.908
1.168
221
0.767
n.a.
244
0.765
n.a.
244
-0.100
(0.072)
-0.109**
(0.047)
ssc
2
-0.074
(0.075)
taxpayroll
taxpayroll
2
taxprop
0.000
(0.000)
taxprop2
taxvat
0.181*
(0.102)
taxvat2
hconsggdp−1
proexp
unproexp
gf cf−1
log(pop)
hc
outputgap
debt−1
llgdp
unem
avg
current
depositrate
Tax thresholds
taxinc
taxf irms
ssc
taxpayroll
taxprop
taxvat
R2
DW-stat
Obs.
RLS
(11)
2
ssc
GMM
(10)
taxinc2
taxf irms
OLS-FE
(9)
-0.275**
(0.107)
-0.058
(0.145)
-0.369
(0.261)
-0.230
(0.215)
0.402***
(0.129)
-0.021
(1.073)
-1.079
(3.057)
-1.663
(5.676)
0.313
(1.929)
-1.726
(6.500)
-0.099*
(0.060)
-0.133***
(0.038)
-0.119
(0.076)
-0.179*
(0.092)
0.170**
(0.079)
Notes: *, ** and *** represent statistical significance at levels of 10%, 5% and 1% respectively. The robust standard errors are in brackets. The
White diagonal covariance matrix is used in order to assume residual heterokedasticity, with the exception for RLS technique. The DW-statistic is the
Durbin-Watson statistic. The non-bold and bold values express, respectively, maximum and minimum optimal tax items levels.
11
Table 5: Linear and non-linear long-run impact results of taxation structure on household
income inequalities.
OLS
realgdppc−1
taxinc
taxf irms
(12)
(13)
(14)
(15)
(16)
0.000***
(0.000)
-0.086*
(0.047)
0.000***
(0.000)
0.043
(0.047)
0.004***
(0.001)
0.143***
(0.035)
0.672***
(0.163)
-5.371***
(0.385)
4.758**
(2.007)
-0.556***
(0.084)
1.380***
(0.135)
2.369***
(0.421)
-0.177*
(0.093)
-2.310***
(0.435)
0.585
(0.436)
-0.162
(0.126)
1.169**
(0.510)
-0.714***
(0.166)
-0.258***
(0.047)
0.290***
(0.032)
0.162***
(0.049)
-0.009
(0.006)
-0.126***
(0.041)
-0.028*
(0.016)
0.000**
(0.000)
0.311***
(0.105)
-0.018***
(0.004)
-1.706***
(0.286)
0.122***
(0.029)
-0.594***
(0.137)
0.003
(0.010)
-1.689**
(0.658)
0.862***
(0.276)
-3.330***
(0.71)
0.938***
(0.150)
0.514
(0.375)
-0.023
(0.018)
0.004***
(0.001)
0.115***
(0.031)
0.745***
(0.172)
-4.893***
(0.689)
6.858***
(2.098)
-0.463***
(0.086)
1.220***
(0.175)
1.948***
(0.423)
-0.227***
(0.080)
-1.112***
(0.390)
0.797*
(0.451)
-0.290**
(0.146)
0.456
(0.533)
-0.576***
(0.187)
-0.170***
(0.059)
0.275***
(0.033)
0.136***
(0.042)
-0.004
(0.005)
-0.083**
(0.037)
-0.064***
(0.015)
0.000***
(0.000)
-0.140***
(0.038)
0.000
(0.001)
0.106***
(0.017)
5.405***
(1.649)
0.143
(0.768)
1.395
(0.996)
0.178***
(0.041)
-0.051
(0.135)
0.030
(0.188)
-0.054*
(0.029)
-0.541***
(0.184)
0.307*
(0.170)
0.249**
(0.097)
0.900***
(0.305)
0.260**
(0.113)
-0.306***
(0.038)
0.106***
(0.028)
-0.022
(0.029)
0.001
(0.002)
-0.021
(0.023)
-0.015
(0.016)
0.000***
(0.000)
0.328**
(0.155)
-0.023***
(0.008)
-0.243**
(0.115)
0.010
(0.007)
-1.179***
(0.324)
0.038***
(0.013)
-1.645***
(0.430)
0.795***
(0.199)
-0.587
(0.601)
0.086
(0.119)
0.771***
(0.275)
-0.036***
(0.012)
-0.001
(0.001)
0.111***
(0.018)
5.447***
(1.825)
-0.047
(0.872)
0.071
(1.097)
0.202***
(0.061)
-0.016
(0.145)
-0.298
(0.237)
-0.045
(0.032)
-0.230
(0.270)
0.250
(0.153)
0.107
(0.099)
0.971***
(0.283)
0.207
(0.14)
-0.287***
(0.045)
0.106***
(0.035)
-0.052**
(0.024)
0.000
(0.003)
-0.008
(0.030)
-0.018
(0.016)
0.000***
(0.000)
-0.079
(0.052)
0.004***
(0.001)
0.154***
(0.034)
0.667***
(0.159)
-5.182***
(0.381)
4.989**
(2.027)
-0.575***
(0.083)
1.313***
(0.127)
2.307***
(0.423)
-0.194**
(0.096)
-2.432***
(0.436)
0.571
(0.439)
-0.176
(0.122)
1.049**
(0.507)
-0.724***
(0.165)
-0.276***
(0.046)
0.299***
(0.031)
0.162***
(0.050)
-0.009
(0.006)
-0.114***
(0.041)
-0.035***
(0.016)
0.000***
(0.000)
0.253***
(0.092)
-0.017***
(0.003)
-1.190***
(0.180)
0.072***
(0.015)
-0.487***
(0.119)
-0.004
(0.008)
-1.854***
(0.582)
0.970***
(0.240)
-2.930***
(0.646)
0.849***
(0.137)
0.894***
(0.322)
-0.034**
(0.015)
0.003***
(0.001)
0.135***
(0.03)
0.873***
(0.163)
-4.323***
(0.555)
6.322***
(2.072)
-0.444***
(0.082)
1.134***
(0.150)
1.885***
(0.416)
-0.245***
(0.085)
-1.159***
(0.400)
0.840*
(0.441)
-0.273*
(0.140)
0.523
(0.533)
-0.496***
(0.181)
-0.199***
(0.058)
0.296***
(0.032)
0.158***
(0.040)
-0.006
(0.005)
-0.074**
(0.036)
-0.049***
(0.014)
0.006***
(0.001)
0.124***
(0.026)
0.555***
(0.115)
-3.794***
(0.303)
0.426
(1.420)
-0.326***
(0.062)
1.057***
(0.086)
2.506***
(0.277)
-0.221***
(0.053)
-2.783***
(0.299)
0.706***
(0.233)
-0.118*
(0.07)
2.218***
(0.251)
-0.699***
(0.131)
-0.277***
(0.035)
0.331***
(0.022)
-0.079***
(0.03)
-0.003
(0.007)
-0.119***
(0.029)
-0.022*
(0.013)
0.000***
(0.000)
0.146**
(0.062)
-0.016***
(0.002)
-0.863***
(0.117)
0.053***
(0.010)
-0.578***
(0.082)
0.000
(0.005)
-1.552***
(0.365)
0.772***
(0.152)
-0.802**
(0.381)
0.368***
(0.088)
1.745***
(0.217)
-0.075***
(0.010)
0.007***
(0.001)
0.094***
(0.019)
0.87***
(0.094)
-2.609***
(0.335)
-0.417
(1.153)
-0.221***
(0.049)
0.846***
(0.078)
1.130***
(0.230)
-0.207***
(0.039)
-1.133***
(0.229)
0.905***
(0.187)
-0.310***
(0.061)
2.025***
(0.201)
-0.359***
(0.108)
-0.155***
(0.028)
0.366***
(0.018)
-0.028
(0.023)
-0.002
(0.005)
-0.046**
(0.022)
-0.022**
(0.010)
-
7.44%
8.26%
0.96%
1.73%
13.15%
-
7.13%
15.51%
1.03%
10.71%
-
8.64%
6.99%
0.98%
1.78%
.
-
4.56%
8.14%
1.01%
1.09%
11.63%
0.897
0.386
362
0.932
0.554
362
0.992
1.042
362
0.992
0.763
362
0.896
0.376
361
0.929
0.627
361
0.749
n.a.
362
0.786
n.a.
362
-0.388***
(0.070)
-0.290***
(0.039)
ssc
2
0.700***
(0.164)
taxpayroll
taxpayroll
2
taxprop
-0.114
(0.167)
taxprop2
taxvat
0.017
(0.095)
taxvat2
avg
unem
log(pop)
hc
rtf pna
pubser
def
pubor
eco
env
hou
hea
cul
edu
socpro
ageratioold
depositrate
f oreigninvestment
gf cf
hconsggdp
Tax thresholds
taxinc
taxf irms
ssc
taxpayroll
taxprop
taxvat
R2
DW-stat
Obs.
RLS
(11)
2
ssc
GMM
(10)
taxinc2
taxf irms
OLS-FE
(9)
0.024
(0.050)
-0.281***
(0.062)
-0.149
(0.198)
0.091
(0.128)
-0.056
(0.073)
-0.410***
(0.081)
-0.303***
(0.042)
0.642***
(0.167)
-0.305
(0.187)
-0.069
(0.102)
-0.197***
(0.053)
-0.315***
(0.034)
0.591***
(0.110)
0.280**
(0.122)
-0.015
(0.061)
Notes: *, ** and *** represent statistical significance at levels of 10%, 5% and 1% respectively. The robust standard errors are in brackets. The
White diagonal covariance matrix is used in order to assume residual heterokedasticity, with the exception for RLS technique. The DW-statistic is the
Durbin-Watson statistic. The non-bold and bold values express, respectively, maximum and minimum optimal tax items levels.
12
Table 6: Summary of tax items threshold values for households’ consumption and inequalities.
Consumption
taxinc
Inequalities
Short-run
Long-run
Short-run
Long-run
Mean
-
-
7.19%
6.94%
8.820%
5.67%
-
7.46%
7,80%
2.806%
-
9.50% / 11.80%
15,51%
15.51%
8.345%
1.44%
1.30%
1.01%
1.00%
0.369%
taxprop
-
-
1.56%
1.53%
1.745%
taxvat
-
-
11.88%
11.83%
10.588%
taxf irms
ssc
taxpayroll
Notes: The non-bold and bold values presented in the short-run and long-run columns express, respectively, the maximum and minimum optimal tax
items levels. The values expressed in italics represent average values.
13