Dynamic Economic Impact of Government Revenue: A Dynamic Equilibrium Study on the Effect of China's Total Government Revenue on the Economic Growth of the National Economy

Author: Fang Sheng
Publisher:
Publish Date: 2007-01-01
Features: Theoretically, economics determines taxation, and taxation, in turn, affects the economy. A country's government revenue and tax structure will impact its economy. However, few studies have conducted specialized econometric research on the actual effects of China's specific government revenue and tax structure on economic changes. This paper comprehensively employs a dynamic equilibrium analysis method combining structural equation modeling and time series analysis. It extensively uses modern econometric techniques such as simulation analysis, unit root tests, time series differencing, Johansen cointegration rank tests, impulse response analysis, variance analysis, vector orthogonalization, and Granger-Wald causality tests. For the first time on a large scale, this paper conducts a multivariate joint econometric analysis of the economic impact effects of China's government revenue system and tax revenue structure on economic variables since the reform and opening-up in 1978. The economic variables used in the paper are the growth rate of gross domestic product (GDP) and the investment rate. The government revenue variables include total government revenue, budget surplus or deficit. The tax structure variables are the value-added tax (VAT), business tax, consumption tax, corporate income tax (including foreign-invested enterprises and foreign enterprises, the same below), and personal income tax.