Estimation Of Relationship Between Macroeconomic Variables And The Direct Taxes To Gross Domestic Product Ratio (TGDP) With Income Distribution

Abstract

According to the importance of income distribution, this study aims at investigating the relationship between macroeconomic variables and the direct taxes to GDP ratio (TGDP) with income distribution. This study considers the GDP, unemployment and inflation rates as the macroeconomic variables and Gini coefficient as the income distribution index. This study covers the period of 1988-2023. The model estimation is done according to the cointegration issues and autoregressive distributed lag (ARDL). The obtained results reflect the positive impact of unemployment, inflation rate, and economic growth as well as the negative impact of direct tax ratio on the production. According to the long-term estimation of model, the increased GDP growth will enhance Gini coefficient and thus the income inequality in the long term, while the increased tax will reduce Gini coefficient, and consequently the income inequality. The unemployment and inflation rates have positive impact on Gini coefficient in the long term. According to the results of error correction model, the error correction coefficient is equal to 0.05 which indicates the appropriate rate of error adjustment.