The Korean Economic Forum
Tax Structure, Economic Growth, and Income Inequality: Long-term Analysis and Policy Implications
Young Lee (Hanyang University)Year 2021Vol. 14No. 1
AbstractUsing unbalanced panel data of countries, the paper investigates tax structure,economic growth, and income inequality. We observe three different types of welfare and corresponding tax system among countries with steady growth.Growth regression results show that countries with lower corporate income tax rates tend to grow faster, consistent with existing studies. Income ineqaulity regression results show that personal income tax rates and their progressivity are associated with lower income inequality. Main policy implication of the paper is that countries need to have progressive personal income tax and low corporate income tax to pursue economic growth and equity simultaneously.