NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How is Tax Policy Conducted over the Business Cycle?

Carlos A. Vegh, Guillermo Vuletin

NBER Working Paper No. 17753
Issued in January 2012
NBER Program(s):   IFM

It is well known by now that government spending has typically been procyclical in developing economies but acyclical or countercyclical in industrial countries. Little, if any, is known, however, about the cyclical behavior of tax rates (as opposed to tax revenues, which are endogenous to the business cycle and hence cannot shed light on the cyclicality of tax policy). We build a novel dataset on tax rates for 62 countries for the period 1960-2013 that comprises corporate income, personal income, and value-added tax rates. We find that, by and large, tax policy is acyclical in industrial countries but mostly procyclical in developing countries. Further, tax policy in countries with better institutions and/or more integrated with world capital markets tends to be less procyclical/more countercyclical.

download in pdf format
   (1138 K)

email paper

This paper is available as PDF (1138 K) or via email.

This paper was revised on December 16, 2014

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17753

Users who downloaded this paper also downloaded these:
Ilzetzki and Vegh w14191 Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?
Frankel, Vegh, and Vuletin w17619 On Graduation from Fiscal Procyclicality
Riera-Crichton, Vegh, and Vuletin w18497 Tax Multipliers: Pitfalls in Measurement and Identification
Vegh and Vuletin w18175 Overcoming the Fear of Free Falling: Monetary Policy Graduation in Emerging Markets
Favilukis, Kohn, Ludvigson, and Van Nieuwerburgh w17751 International Capital Flows and House Prices: Theory and Evidence
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us