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Wednesday, March 23, 2005

Atlas will shrug

Working on the empirics for an international corruption paper and for S&G I related the five year growth rates for 61 countries to the highest individual marginal tax rate, the highest corporate marginal tax rate and inflation.

Here's what STATA kicked out:

------------------------------------------------------
| Robust
dgdp5yr | Coef. Std. Err. t P>|t|
-------------+----------------------------------------
highindtax | .0278137 .0245767 1.13 0.262
highcorptax | -.0719255 .0370244 -1.94 0.057
inflation | -.0705615 .0263747 -2.68 0.010
yr02 | -.0070828 .002313 -3.06 0.003
_cons | .0412402 .0128223 3.22 0.002
------------------------------------------------------

The upshot seems to be that higher corporate tax rates have a strong negative impact on growth rates, as does inflation. The higher individual tax rate takes the "wrong" sign and is statistically insignificant.

The results might not be robust, but they are suggestive. Atlas will shrug and when he does, economic growth declines.

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