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NOTE ON CONVERGENCE UNDER INCOME TAX PROGRESSIVITY

Published online by Cambridge University Press:  01 April 2008

PATRICK PINTUS
PATRICK PINTUS*
Affiliation:
Université de la Méditerranée and GREQAM-IDEP
*
Address correspondence to: Patrick Pintus, GREQAM, 2 rue de la Charité, 13236 Marseille Cedex, France, e-mail: pintus@univ-aix.fr.
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Abstract

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Building on the theoretical prediction that income tax progressivity increases the speed of convergence in neoclassical, open-economy growth models, this paper asks whether tax progressivity is a potential source of differences across regions in convergence rates. In a sample of U.S. data, over the period 1920–1990, regional convergence and tax progressivity are found to be positively correlated, which supports the theoretical results. Moreover, some data on six OECD countries also accord with such a positive relationship. Overall, the model is successful in predicting the large range of available convergence estimates when the tax rate is elastic enough with respect to the tax base.

Keywords

ConvergenceOpen EconomyProgressive Taxation

Information

Type
NOTE
Information
Macroeconomic Dynamics , Volume 12 , Issue 2 , April 2008 , pp. 286 - 299
Copyright
Copyright © Cambridge University Press 2007

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