The impacts of income inequality on the gross domestic product under direct taxation: evidence from emerging market economies
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 2 July 2021
Issue publication date: 8 October 2021
Abstract
Purpose
This study analyzes the impacts of income inequality after direct taxation on the gross domestic product as a fiscal policy tool in the development process.
Design/methodology/approach
The model of the study is based on Munielo-Gallo and Roca-Sagales (2013), which examined the fiscal policy, income inequality and economic growth simultaneously. The study uses two models to analyze the relationship between income inequality and gross domestic production under direct taxation by employing autoregressive distributed lag (ARDL) model for selected emerging market economies.
Finding
Empirical results reveal a negative long-run relationship between variables in some countries in line with the literature, despite a positive relationship in others. Moreover, the results exhibit the negative impact of income inequality after direct taxation on the gross domestic product decreases.
Originality/value
Results of the study highlight the importance of direct taxation on income inequality concerning the reflects on economic growth. It suggests that when the income distribution is fairer, it may positively affect the gross domestic product. The study provides a new perspective to the related literature by investigating the role of income inequality under direct taxation for gross domestic product.
Keywords
Citation
Yıldırım, A.E. and Dibo, M. (2021), "The impacts of income inequality on the gross domestic product under direct taxation: evidence from emerging market economies", International Journal of Social Economics, Vol. 48 No. 10, pp. 1516-1541. https://doi.org/10.1108/IJSE-12-2020-0809
Publisher
:Emerald Publishing Limited
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