The Long-Run Determinants of Government Receipts
Fiscal Sustainability Conference, p. 381, 2000
42 Pages Posted: 17 Jul 2012
Date Written: January 20, 2000
Abstract
The paper by Carlos Martinez-Mongay focuses on the long-term determinants of government receipts rather than expenditure. The author examines the evolution of revenues in EU countries over the past thirty years as well as the literature on the factors affecting revenue trends in the long run. More specifically, he reviews the role of ageing, economic integration and structural changes. Two sets of econometric estimates are presented. The first is based on a panel of data covering 17 countries (EU members, USA and Japan) over the 1970-1998 period. The second is based on time series analyses at country level for the same sample. Martinez concludes that the long-term determinants of revenues and expenditure are broadly the same: demographic dependency, labour market performance and income. Other structural factors play a secondary role in explaining the evolution of tax burdens in industrial countries. Higher shares of self-employment and manufacturing employment tend to reduce tax receipts, but the effect is relatively small. However, economic integration and technological changes may play a relevant role in shaping tax structures and determining the tax burdens borne by labour, capital and consumption.
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