Effects of tax structure on economic growth: A comparative analysis between European Union and Turkey

The starting point of this thesis, which aims at determining the relationship between economic growth and tax structure, is the proposal of the EU Commission in 2006 to shift tax revenues from income taxes to consumption and property taxes in order to support economic growth. However, although there are few studies examining the relationship between tax structure and economic growth, as far as we know, there is no study that deals with EU member states and Turkey together. With this thesis, it is aimed at filling this gap. To ensure data unity in comparisons and to estimate the relationship between the two variables in the longest possible period (1970-2017) the OECD database is used. For this reason, Turkey and 15 EU member states who have related data are included in the analysis. By adopting the latest approach in the literature, revenue-neutral growth model has been applied in which the effects of public expenditures are eliminated. In this model, unlike other studies, an index that includes the return on education as well as the average years of schooling is used to represent human capital. Pooled mean group estimation method is preferred because it allows to calculate the long-term and short-term relationship between the two variables separately. The results achieved support the proposal of the EU Commission in the long term. Results for the short term vary by country.