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© 2019 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.

Abstract

This paper investigates new insights into the effect taxation has on the welfare state, using Granger causality analysis, and focusing on both economic growth and human development as welfare components. Moreover, Granger causality allows us to determine whether or not there is a bidirectional causal relationship between taxes, growth, and human development. The analysis is based on a comparative study between part of the Central and Eastern Europe (CEE) countries and the richest European Countries, over the period 1995–2015. Taxes are illustrated by different types of tax revenues to GDP ratio, economic growth is defined by gross domestic product and gross national income, while the human development index (HDI) included in the analysis is a composite measure used to rank countries based on their social and economic development level. Results confirm the fact that taxes support economic growth, but their impact on human development is rather limited. However, in countries with higher HDI, an increase in tax revenues is expected, but over long-term. This study confirms that taxes are an important instrument for governments, and should be used in economic growth. In addition, taxes are closely related to well-being, as citizens from countries with large HDI values are more likely to pay higher taxes over time. Therefore, practical tax reforms should imply an equilibrium between equity and a decent standard of living that supports life expectancy, increased tax revenues, and efficiency.

Details

Title
How Taxes Relate to Potential Welfare Gain and Appreciable Economic Growth
Author
Vatavu, Sorana 1   VIAFID ORCID Logo  ; Oana-Ramona Lobont 1 ; Stefea, Petru 2 ; Brindescu-Olariu, Daniel 2 

 Finance Department, Faculty of Economics and Business Administration, West University of Timisoara, 300115 Timisoara, Romania 
 Management Department, Faculty of Economics and Business Administration, West University of Timisoara, 300115 Timisoara, Romania 
First page
4094
Publication year
2019
Publication date
2019
Publisher
MDPI AG
e-ISSN
20711050
Source type
Scholarly Journal
Language of publication
English
ProQuest document ID
2535371540
Copyright
© 2019 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.