Dear All,
I am doing on my study analyzing the impact of tax composition on income inequality.
Therefore, I need a model in which I need to relate tax composition with income inequality. In addition, in my analysis, I included two control variables such as GDP per capita and inflation rate. Therefore, I would be grateful if you could suggest a suitable model for my analysis.
Thanks in advance
Tax theory distinguishes between direct and indirect taxation. Direct taxes burden income and/or assets, indirect taxes (consumption taxes or taxes on production) burden individual household consumption. While direct taxes are mostly associated with progressive tax rates, these tend to weigh more heavily on higher incomes; Since indirect taxes usually have proportional tax rates and the marginal consumption rate falls with increasing income, according to tax theory, indirect taxes often have so-called regression effects, i.e. the burden on those on lower incomes is greater than on those on higher incomes. It is now an empirical question what the overall effects of a tax system on the distribution of income and wealth are. Exact data on the distribution of income and wealth and on the distribution of the tax burden (indirect and direct) among households is then required for the analysis. These are not available for most (if not all) countries. However, if such panel datasets are available, an extremely powerful tax simulation model (micromodel covering all households) is required to calculate the effects on income and wealth distribution.
Literature:
https://www.researchgate.net/publication/273901679_Microsimulation_of_Alternative_Tax_and_Transfer_Systems_for_the_Federal_Republic_of_Germany
https://www.researchgate.net/publication/274020392_Redistribution_and_the_EfficiencyJustice_Trade-off
https://www.researchgate.net/publication/274363403_Taxes_Tax_Systems_and_Economic_Growth
I suggest you use a multivariate regression model. It is suitable to use when you have two or more dependent variables (GDP per capita and inflation rates)
The Pearson correlation coefficient SPSS is a test statistic that measures the statistical relationship or correlation between two continuous variables. It is defined as the best way to measure the association between the variables of interest because it is based on the method of covariance and gives information about the size of the association, as well as about the direction of the relationship.
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