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Abstract

This article provides an agnostic, historical review of taxation and economic growth. It critically evaluates how the relationship between the two has evolved throughout modern history. After an introduction that provides a general overview of the relationship between taxation and growth, the article first discusses the positive role of taxes in promoting economic development in the pre-war and post-war periods of the 1940s. It then critically comments on Solow's neoclassical growth theory and explains the experience of stagflation faced by many advanced countries in the 1970s and its implications for tax theory. New growth theories that attribute an important role in economic growth to government policy in general and tax policy in particular are then discussed. This is followed by a rounded five-point assessment of the impact of taxes on growth. The article ends with a general conclusion.

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Abstract

The purpose of the study is to examine the relationship between tourism development and economic growth in Greece, using the Autoregressive Distributed Lag (ARDL)-Bounds testing procedure. The present paper attempts to examine the relevance of the tourism led growth hypothesis according to the Kaldorian theory. The analysis was carried out for the period from 1963 to 2016 and involves the short-run as well as the log-run impact. As a proxy for the output of the tourism sector, its receipts are employed, while as an index for economic growth, the GDP is employed. The empirical results show that the economy of Greece can recover and return to the long-run equilibrium with a speed of adjustment 7.17% per year.

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Ferenc Jánossy was the most important Hungarian pioneer of surveys on long time series. In the 1960s he devised the famous theory of trendlines, which allowed him to forecast the great world economic recession of the 1970s a decade in advance. The best-known international authority on compiling historical time series is Angus Maddison, who prepared time series of the main demographic and macroeconomic indicators for 56 countries, from 1820 to the present day. Both scientists, whose survey method showed both a historical and a quantitative approach, reached the conclusion that human capital is the most important of production factors for securing long-term economic growth. The main purpose of this paper is to compare their results with the latest development, which is known as the “new growth theory”.

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This paper reviews the issue of population size (scale effects) in idea-based growth models. It addresses both weak and strong scale effects and incorporates the related distinctive features of the three strata of idea-based growth models. The paper also comments on third-generation models, emphasising their fragile framework due to the limited range of R&D spillover space they can accommodate. It is argued that because of the shortcomings of the third-generation models, a precise mapping of the relationship between population size and economic growth requires further research.

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The balance-of-payments can act as a constraint on the rate of output growth, on putting a limit to the growth in the level of demand to which supply can adapt. Regional economies might be particularly sensitive to this effect, since they are presumably more integrated among them. In this paper, we examine this issue for the case of the 17 Spanish regions over the period 1988–2009, and calculate their balance-of-payments-constrained growth rates. By comparing these balance-of-payments-constrained growth rates with the actual growth rates, we would be able to assess whether the balance-of-payments has worked as a constraint on growth.

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Abstract

We investigate the relationship between economic growth and real exchange rate (RER) misalignments within the European Union (EU) during the period of 1995–2016. In addition to the relative price level of GDP, we quantify an alternative indicator for the RER: the internal relative price of services to goods. We interpret RER misalignments as deviations from the levels consistent with the levels of economic development among the EU countries. Using pooled OLS and dynamic panel techniques, we find that within the EU over- (under-) valuations are associated with lower (higher) growth. This is mainly due to developments in the countries operating under the fixed exchange rate regimes. Our results indicate that the level of development does not influence the strength of the growth-misalignment relationship within the EU. Regarding the price level of GDP, we find that the positive relationship between undervaluation and growth diminishes with the degree of undervaluation. We find that overvaluation has a statistically significant negative effect on export market shares and private investments, indicating that both the competitiveness and the investment channels play a role in the relationship between growth and RER misalignments. As an extension, we show that the effects of “wage misalignments” from levels consistent with productivity are also negatively related to economic growth. The policy implications of the analysis point to the importance of a growth strategy avoiding overvaluation on the one hand, and to the futility of aiming at excessive undervaluation, on the other.

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Crisis and economic growth in the EU

Medium and long-term trends

Acta Oeconomica
Authors:
P. Halmai
and
V. Vásáry

The study analyses the impacts of the financial and economic crisis on potential growth in the European Union. It identifies the main channels of impact mechanism and carries out quantitative estimations in order to reveal the medium and long-term trends. According to over findings the impacts of the crisis are significantly different in the main country-groups of the EU. The basic structural problem of the EU is considered the decreasing trend in potential growth which might be further strengthened through the lasting consequences of the crisis.

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Acta Oeconomica
Authors:
Konstantinos Katrakilidis
,
Persefoni Tsaliki
, and
Theodosios Tsiakis

This paper empirically explores the validity of the Kaldorian insights into economic growth and development. In doing so, we examine the three laws outlined in Kaldor’s analysis and test their relevance to the Greek economy for the period 1970–2006. We employ the ARDL method to analyse the long-run and short-run relationships among the variables. The empirical results confirm Kaldor’s proposition about the importance of the demand side of the economy and thus provide the necessary theoretical and empirical ground for innovative economic policies in these difficult times for Greece.

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We tested the hypothesis of the political basis for economic rights and constructed our own variables of political regimes’ classification for the years 1820–2000. We found significant positive interdependencies between democracy indicators and economic growth. The protection of private property rights requires, first and foremost, due guarantees for personal immunity. Discretionary arrests and property seizures undermine any formal guarantees of private property, low taxation benefits, etc. Personal immunity should be defended even for “unpleasant” persons or for the possible political opponents of the country’s ruler.

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The role of spatial proximity to innovation inputs (such as industrial R&D or academic research) in technological change has been widely studied in the economics literature. However, most of the papers in this research area are based on data for technologically advanced countries such as the US and parts of the EU. During transition recently accessed countries of Central Europe have undergone a dramatic restructuring process that significantly affected their systems of innovation: R&D expenditures, academic research and patenting activity have declined. According to some research results FDI constituted the most significant drive of technological change during the 1990s. Is there any role of spatially mediated knowledge spillovers in innovation in these countries? To what extent regional systems of innovation have started to develop in Central European new EU member countries? These questions have rarely been raised in the relevant literature. Using regional data this paper adopts econometric modelling techniques commonly applied in innovation research to study the role of localised knowledge inputs in technological change in Hungary.

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