Corresponding author: Christopher Heady, School of Economics, University of Kent, Keynes College, Canterbury, Kent CT2 7NP, UK. Email: C.J.Heady@kent.ac.uk.
Tax Policy for Economic Recovery and Growth†
Article first published online: 1 FEB 2011
© 2011 The Author(s). The Economic Journal © 2011 Royal Economic Society
The Economic Journal
Volume 121, Issue 550, pages F59–F80, February 2011
How to Cite
Arnold, J. M., Brys, B., Heady, C., Johansson, Å., Schwellnus, C. and Vartia, L. (2011), Tax Policy for Economic Recovery and Growth. The Economic Journal, 121: F59–F80. doi: 10.1111/j.1468-0297.2010.02415.x
This article benefited greatly from important contributions from Stefano Scarpetta and two anonymous referees. The authors also thank Jørgen Elmeskov, Giuseppe Nicoletti, Jeffrey Owens, Jean-Luc Schneider and Ana Cebreiro-Gomez but remain responsible for all errors. The views expressed in this article are those of the authors and do not necessarily reflect those of the OECD or the governments of its member countries.
- Issue published online: 1 FEB 2011
- Article first published online: 1 FEB 2011
This article identifies tax policy that both speeds recovery from the current economic crisis and contributes to long-run growth. This is a challenge because short-term recovery requires increases in demand while long-term growth requires increases in supply. As short-term tax concessions can be hard to reverse, this implies that policies to alleviate the crisis could compromise long-run growth. The analysis makes use of recent evidence on the impact of tax structure on economic growth to identify which growth-enhancing tax changes can also aid recovery, taking account of the need to protect those on low incomes.