London School of Economics
Houghton Street London WC2A 2AE UK
Institutional Affiliations: London School of Economics and CEPR
NBER Working Papers and Publications
|May 2018||Taxes and Growth: New Narrative Evidence from Interwar Britain|
with James Cloyne, Nicholas Dimsdale: w24659
The impact of fiscal policy on economic activity is still a matter of great debate. And, ever since Keynes first commented on it, interwar Britain, 1918- 1939, has remained a particularly contentious case | not least because of its high debt environment and turbulent business cycle. This debate has often focused on the effects of government spending, but little is known about the effects of tax changes. In fact, a number of tax reforms in the period focused on long-term and social objectives, often reflecting the personality of British Chancellors. Based on extensive historiographical research, we apply a narrative approach to the interwar period in Britain and isolate a new series of exogenous tax changes. We find that tax changes have a sizable effect on GDP, with multipliers around 0.5 ...