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Elasticity of taxation on Social Expenditures

KIM, SEONG WOOK 1

1협성대학교

Accredited

ABSTRACT

The purpose of this study is to empirically identify effects of social expenditures onscales of tax revenue. The authors in this study structured models to estimate optimaltax ratio based on major hypotheses on relations between revenue and expenditure,decomposed social expenditures according to types of social provision,and to estimate elasticities of each type and consequent tax. As a result, total publicsocial expenditures and welfare expenditure by types of social provision showedstatistically significantly positive effects on scales of tax revenue. However, contraryto the general trend, the nations investigated showed considerable deviationin the aspect of fiscal sustainability in welfare expenditures. Korea was in lower fiscalsustainability, whose social expenditures were investigated not to reach the naturalsocial goals or to fail to correspond to improvement in market productivity. Itis evident that the outcome of social expenditures is not needed to be estimatedonly by fiscal criteria, but these analyses of elasticities empirically confirmed thatsocial expenditures are rather factors of finance income that may be returned to taxrevenue in the future than simple expense of finance threatening fiscal health, additionallypresenting certain political consent on drawing up measures to innovatewelfare provision in order to maximize fiscal effects.

Citation status

* References for papers published after 2022 are currently being built.