## Do Taxes Matter for Long-Run Growth? Harberger's Superneutrality Conjecture

_IMF Working Papers, August 1, 1995_

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## Bibliographic details
- Authors: Patrick K. Asea, Gian M Milesi-Ferretti, Enrique G. Mendoza
- Published: August 1, 1995
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451955798.001

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### Summary
- Harberger’s superneutrality conjecture contends that, although in theory the mix of direct and indirect taxes affects investment and growth, in practice growth effects of taxation are negligible.
- The paper provides evidence in support of this view by testing the predictions of endogenous growth models driven by human capital accumulation.
- The theoretical analysis highlights implications of different taxes for growth and investment in these models.
- The empirical work is based on cross-country regressions and numerical simulations, using a new methodology for estimating aggregate effective tax rates.
- Results show significant investment effects from income and consumption taxes that are consistent with small growth effects.
- The results are robust to the introduction of other growth determinants.

### Theoretical analysis
- Focus: endogenous growth models driven by human capital accumulation.
- Highlights: implications of different taxes (direct and indirect) for growth and investment within these models.
- Central claim: the mix of direct and indirect taxes theoretically influences investment and growth, but practical growth effects are negligible (Harberger’s superneutrality conjecture).

### Empirical methodology
- Data and approach: cross-country regressions and numerical simulations.
- Innovation: uses a new methodology for estimating aggregate effective tax rates.
- Empirical focus: investment responses to income and consumption taxes and implications for long-run growth.

### Main empirical findings and robustness
- Findings: Significant investment effects from income and consumption taxes.
- Interpretation: Investment effects are consistent with small growth effects.
- Robustness: Results remain robust when other growth determinants are introduced.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/do-taxes-matter-for-long-run-growth-harberger-s-superneutrality-conjecture-1274_