Shaw (1986) used data from 107 countries over period 1970-85 and found that changes in the aggregate average tax rate did not have a significant effect on output growth. He did find, however, that increase in the aggregate average tax rate had a negative effect on the marginal productivity of investment in physical capital and to a lesser extent, on labour. Jorgen (1973) used cross-sectional data based on period averages for 1970-73 and observed that the marginal rate of income tax (calculated by regressing a time series data of income tax revenues on a time series data of GDP for each country) had a significant, negative effect on per capita GDP growth, but that no other tax measures did. He did find those income taxes, the ratio of domestic taxes to GDP, and the ratio of domestic taxes to consumption plus investment had significant, negative effects on the share of private investment in GDP. 2.3.3 Evidence from Developing Nations Chowdhury (1991) suggested that growth in government expenditure has a greater impact on changes in nominal income than the growth in monetary base. He added that the effect of a change in the growth rate of government expenditure on nominal income last for a relatively longer period of time, compared to a change in the growth rate of monetary base. Moreover, the magnitude of the effect is also greater
Shaw (1986) used data from 107 countries over period 1970-85 and found that changes in the aggregate average tax rate did not have a significant effect on output growth. He did find, however, that increase in the aggregate average tax rate had a negative effect on the marginal productivity of investment in physical capital and to a lesser extent, on labour. Jorgen (1973) used cross-sectional data based on period averages for 1970-73 and observed that the marginal rate of income tax (calculated by regressing a time series data of income tax revenues on a time series data of GDP for each country) had a significant, negative effect on per capita GDP growth, but that no other tax measures did. He did find those income taxes, the ratio of domestic taxes to GDP, and the ratio of domestic taxes to consumption plus investment had significant, negative effects on the share of private investment in GDP. 2.3.3 Evidence from Developing Nations Chowdhury (1991) suggested that growth in government expenditure has a greater impact on changes in nominal income than the growth in monetary base. He added that the effect of a change in the growth rate of government expenditure on nominal income last for a relatively longer period of time, compared to a change in the growth rate of monetary base. Moreover, the magnitude of the effect is also greater
540_COURSES_Fiscal_Policy_and_Macroeconomic_Stability_in_Nigeria_1005428908.docx