## Relative Prices, Economic Growth and Tax Policy

_IMF Working Papers, November 1, 1995_

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**Canonical URL:** [Relative Prices, Economic Growth and Tax Policy](https://www.imf.org/en/publications/wp/issues/2016/12/30/relative-prices-economic-growth-and-tax-policy-1952)

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## Bibliographic details
- Authors: Michael Sarel
- Published: November 1, 1995
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451853667.001

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### Link between relative prices and tax policy
- The paper examines the role of relative prices in economic growth and the possibility that relative prices are (or can be) partly determined by tax policy.
- In the opening section, the paper links relative prices to tax policy.

### Theoretical framework
- Using an extension to a standard model of economic growth, the paper demonstrates that under certain conditions a simple tax policy, that determines the relative price of investment, can affect the investment rate and the permanent growth rate of the economy.

### Data and empirical approach
- The paper develops a method to obtain consistent data on relative prices for a large set of countries.
- Using these data in cross-country regressions, it examines how economic growth is affected by relative prices.

### Key findings
- The results of these empirical tests identify the relative prices as a key factor affecting investment and growth.

### Subject coverage and keywords
- Subject: Agroindustries, Economic sectors, Expenditure, Government consumption, Income, National accounts, Production, Production growth, Public expenditure review
- Keywords: Agroindustries, Government consumption, growth rate, Income, investment goods basket, investment rate, price level, price ratio, Production growth, Public expenditure review, relative price, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/relative-prices-economic-growth-and-tax-policy-1952_