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Review Article

JCR. 2020; 7(2): 455-460


INVESTIGATION OF NONLINEAR AND DYNAMIC RELATIONSHIP OF TAX REVENUE, ECONOMIC WELFARE, AND DEMOCRACY USING GMM

Hasan Farazmand.

Abstract
This article aimed to investigate the relationship between tax revenue, welfare, and democracy level in democratic and undemocratic countries. This investigation was performed by analyzing data from 77 countries for the period 2000-2015. The results obtained by dynamic panel data modeling based on the generalized method of moments (GMM) showed that there is a negative U-shaped relationship between the share of tax revenue in GDP and democracy, indicating that as political participation increases, nations tend to favor minimal states, but as we move from democracy toward authoritarianism, the share of tax revenue increases. Also, a positive relationship was observed between economic welfare and the share of tax revenues, which indicates that the share of government tax revenue increases with the improvement of economic welfare.

Key words: Tax, Welfare, Democracy, Nonlinear Model, GMM,



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