Essays on growth, structural change and taxation

Abstract

This thesis examines economies’ long-run dynamics with theoretical and empirical tools. It is composed of three chapters. In Chapter 1, we provide evidence for the labor share, structural change, fixed costs, and productivity divergence for the US economy that we observe in the data. The theoretical model with increasing fixed cost and dispersion in TFP growth across firms explains the most significant part of the decrease in aggregate labor share. The differentiation in labor shares of the two sectors can also stem from the difference in the standard deviation of TFP growth. In Chapter 2, we estimate a panel Structural VAR model for eleven OECD countries using yearly data between 1973 and 2015. We identify a permanent shock to the corporate income tax rate, which is exogenous to economic activity. Our results show that a cut in corporate income taxation positively influences hours worked and aggregate output for the whole sample. While corporate taxation has been almost halved in OECD countries over the last four decades, the effects of its decline are quite distinct between the two groups of countries. In Chapter 3, we investigate the effect of tax amnesty on the firm dynamics. We use the Difference in Differences (DiD) model to investigate the impact of the tax amnesty in 2011 in Turkey on firms’ employment and net sales. The results show that tax amnesty significantly and negatively impacts the employment and net sales of firms that have tax debt before the amnesty.