This study performs a meta-analysis of the effect of taxes on economic growth in Organization for... more This study performs a meta-analysis of the effect of taxes on economic growth in Organization for Economic Cooperation and Development (OECD) countries. A challenge with synthesizing tax estimates is that they measure different things. This follows because studies differ in the government budget constraints implied by their regression specifications. To address this problem, we use a taxonomy from Gemmell, Kneller, and Sanz that predicts the growth effects from various tax-spending-deficit combinations. We apply this taxonomy to 979 estimates from forty-nine studies of tax effects in OECD countries. Our headline result is that a 10 percent increase in taxes is associated with a decrease in annual gross domestic product (GDP) growth of approximately −0.2 percent when bundled as part of a TaxNegative tax-spending-deficit combination. The same tax increase is associated with an increase in annual GDP growth of approximately 0.2 percent when part of a TaxPositive fiscal policy package. ...
Tax Burden, defined as the ratio of total tax revenues over personal income, is frequently used t... more Tax Burden, defined as the ratio of total tax revenues over personal income, is frequently used to measure state tax policy. The authors analyze the empirical relationship between changes in Tax Burden and changes in tax policies from 1987 to 2000 using states’ forecasts of revenue impacts of new tax legislation. Their two major findings have important implications. First, they demonstrate that income-induced, nontax policy changes are a significant determinant of changes in Tax Burden. These income effects are likely to cause misinterpretation when Tax Burden is used as a variable in economic growth regressions. Second, they estimate that approximately half of the total variation in Tax Burden is due to changes in nontax policy factors. This finding quantifies the extent of the “mismeasurement” problem that has been discussed, but not analyzed, in previous literature. In concluding, the authors promote the use of alternative approaches for estimating the economic effects of taxes.
The Whitman administration’s 30% reduction in New Jersey’s personal income taxes from 1994 to 199... more The Whitman administration’s 30% reduction in New Jersey’s personal income taxes from 1994 to 1996 is prominently cited as a role model for state fiscal policy. The authors investigate whether the growth benefits attributed to the Whitman tax cuts are warranted. Panel data methods are applied to annual observations of county-level employment growth fromNew Jersey and the surrounding economic region. This study’s analysis does not support the hypothesis that tax cuts stimulated employment growth in New Jersey. Although New Jersey did experience substantial employment growth subsequent to the tax cuts, most of this growth was shared by the nearby Economic Areas.
This study provides a comprehensive examination of the work and family structure incentives of pu... more This study provides a comprehensive examination of the work and family structure incentives of public assistance, focusing on the consequences of state-determined programs. Such an approach allows state policy-makers to understand the tradeoffs implicit in their current program parameters. It allows them to better identify alternative arrangements that may be more consistent with policy goals. And it discovers linkages between work and family structure incentives that may be otherwise difficult to discern. We follow the previous ...
This study employs Monte Carlo experiments to evaluate the performances of a number of common pan... more This study employs Monte Carlo experiments to evaluate the performances of a number of common panel data estimators when serial correlation and cross-sectional dependence are both present. It focuses on fixed effects models with less than 100 cross-sectional units and between 10 and 25 time periods (such as are commonly employed in empirical growth studies). Estimator performance is compared on two dimensions:(i) root mean square error and (ii) accuracy of estimated confidence intervals. An innovation of our study is that our ...
Advocates of Constructed Response (CR) questions argue that CR questions provide a different asse... more Advocates of Constructed Response (CR) questions argue that CR questions provide a different assessment of student knowledge than is available from Multiple Choice (MC) questions. If that is the case, and if the benefit in terms of improved assessment is substantial, then it follows that grade outcomes using CR questions should be different from those using MC questions. We investigate this using a large dataset composed of individual assessment results from thousands of students in introductory economics classes at a ...
This study examines one of the hypothesized benefits of using constructed response (CR) questions... more This study examines one of the hypothesized benefits of using constructed response (CR) questions. Namely, that CR questions test a higher-level of understanding than multiple choice (MC) questions. We argue that if this benefit is to justify the higher costs of CR questions, then one important result is that grade outcomes from CR questions should be substantially different than those from MC questions. We use a data set composed of thousands of observations on individual students in introductory economics classes at a ...
In an event study where at least some of the sample firms have their equity securities listed in ... more In an event study where at least some of the sample firms have their equity securities listed in more than one market, the question arises as to which is the most appropriate market (or markets) to use for the purpose of estimating average abnormal returns. When arbitrage activity across these markets is restricted in some way, estimating abnormal returns from just one of the listings potentially throws away valuable information. On the other hand, indiscriminate pooling is likely to result in the same information being counted more than ...
This paper presents new evidence on the impact of Right-To-Work (RTW) on state economic growth. I... more This paper presents new evidence on the impact of Right-To-Work (RTW) on state economic growth. It investigates manufacturing employment growth in Idaho following that state's adoption of RTW in 1986. Idaho is the most recent state to adopt RTW, and the only state to have adopted RTW within the last 25 years. Using a county-level analysis and comparisons based on alternative treatment and control groups, this study finds that manufacturing employment growth was significantly greater in Idaho than in the control ...
This study performs a meta-analysis of the effect of taxes on economic growth in Organization for... more This study performs a meta-analysis of the effect of taxes on economic growth in Organization for Economic Cooperation and Development (OECD) countries. A challenge with synthesizing tax estimates is that they measure different things. This follows because studies differ in the government budget constraints implied by their regression specifications. To address this problem, we use a taxonomy from Gemmell, Kneller, and Sanz that predicts the growth effects from various tax-spending-deficit combinations. We apply this taxonomy to 979 estimates from forty-nine studies of tax effects in OECD countries. Our headline result is that a 10 percent increase in taxes is associated with a decrease in annual gross domestic product (GDP) growth of approximately −0.2 percent when bundled as part of a TaxNegative tax-spending-deficit combination. The same tax increase is associated with an increase in annual GDP growth of approximately 0.2 percent when part of a TaxPositive fiscal policy package. ...
Tax Burden, defined as the ratio of total tax revenues over personal income, is frequently used t... more Tax Burden, defined as the ratio of total tax revenues over personal income, is frequently used to measure state tax policy. The authors analyze the empirical relationship between changes in Tax Burden and changes in tax policies from 1987 to 2000 using states’ forecasts of revenue impacts of new tax legislation. Their two major findings have important implications. First, they demonstrate that income-induced, nontax policy changes are a significant determinant of changes in Tax Burden. These income effects are likely to cause misinterpretation when Tax Burden is used as a variable in economic growth regressions. Second, they estimate that approximately half of the total variation in Tax Burden is due to changes in nontax policy factors. This finding quantifies the extent of the “mismeasurement” problem that has been discussed, but not analyzed, in previous literature. In concluding, the authors promote the use of alternative approaches for estimating the economic effects of taxes.
The Whitman administration’s 30% reduction in New Jersey’s personal income taxes from 1994 to 199... more The Whitman administration’s 30% reduction in New Jersey’s personal income taxes from 1994 to 1996 is prominently cited as a role model for state fiscal policy. The authors investigate whether the growth benefits attributed to the Whitman tax cuts are warranted. Panel data methods are applied to annual observations of county-level employment growth fromNew Jersey and the surrounding economic region. This study’s analysis does not support the hypothesis that tax cuts stimulated employment growth in New Jersey. Although New Jersey did experience substantial employment growth subsequent to the tax cuts, most of this growth was shared by the nearby Economic Areas.
This study provides a comprehensive examination of the work and family structure incentives of pu... more This study provides a comprehensive examination of the work and family structure incentives of public assistance, focusing on the consequences of state-determined programs. Such an approach allows state policy-makers to understand the tradeoffs implicit in their current program parameters. It allows them to better identify alternative arrangements that may be more consistent with policy goals. And it discovers linkages between work and family structure incentives that may be otherwise difficult to discern. We follow the previous ...
This study employs Monte Carlo experiments to evaluate the performances of a number of common pan... more This study employs Monte Carlo experiments to evaluate the performances of a number of common panel data estimators when serial correlation and cross-sectional dependence are both present. It focuses on fixed effects models with less than 100 cross-sectional units and between 10 and 25 time periods (such as are commonly employed in empirical growth studies). Estimator performance is compared on two dimensions:(i) root mean square error and (ii) accuracy of estimated confidence intervals. An innovation of our study is that our ...
Advocates of Constructed Response (CR) questions argue that CR questions provide a different asse... more Advocates of Constructed Response (CR) questions argue that CR questions provide a different assessment of student knowledge than is available from Multiple Choice (MC) questions. If that is the case, and if the benefit in terms of improved assessment is substantial, then it follows that grade outcomes using CR questions should be different from those using MC questions. We investigate this using a large dataset composed of individual assessment results from thousands of students in introductory economics classes at a ...
This study examines one of the hypothesized benefits of using constructed response (CR) questions... more This study examines one of the hypothesized benefits of using constructed response (CR) questions. Namely, that CR questions test a higher-level of understanding than multiple choice (MC) questions. We argue that if this benefit is to justify the higher costs of CR questions, then one important result is that grade outcomes from CR questions should be substantially different than those from MC questions. We use a data set composed of thousands of observations on individual students in introductory economics classes at a ...
In an event study where at least some of the sample firms have their equity securities listed in ... more In an event study where at least some of the sample firms have their equity securities listed in more than one market, the question arises as to which is the most appropriate market (or markets) to use for the purpose of estimating average abnormal returns. When arbitrage activity across these markets is restricted in some way, estimating abnormal returns from just one of the listings potentially throws away valuable information. On the other hand, indiscriminate pooling is likely to result in the same information being counted more than ...
This paper presents new evidence on the impact of Right-To-Work (RTW) on state economic growth. I... more This paper presents new evidence on the impact of Right-To-Work (RTW) on state economic growth. It investigates manufacturing employment growth in Idaho following that state's adoption of RTW in 1986. Idaho is the most recent state to adopt RTW, and the only state to have adopted RTW within the last 25 years. Using a county-level analysis and comparisons based on alternative treatment and control groups, this study finds that manufacturing employment growth was significantly greater in Idaho than in the control ...
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