Tourism and Economic Growth under Heavy Taxation: An Empirical Investigation for Greece, Interdisciplinary Journal of Economics and Business Law
In recent years, the expected response to the economic crisis in Greece came with the implementation of fiscal policy measures, focusing mainly on short-term goals. The elected state governments have implemented a fiscal adjustment policy mostly through increases in taxation. They have also tried to boost the economy after a nine year period of negative GDP growth rates. In a number of cases, the period of tight fiscal policy has yielded and achieved short-term economic objectives. Unfortunately, the impact of such fiscal policy measures is unclear if it has the expected results on a long-term level.
The present paper surveys the role of two of the economic sectors and taxation in the economic growth of Greece. The analysis does not include manufacturing since this sector is non-statistically significant so it was not used in the proposed model. The results, confirm that tourism, agriculture and different types of taxes have a major contribution to GDP growth rates. A linear intertemporal relation is pinpointed between GDP and tourist GDP as well as agriculture GDP and taxes. The empirical results show that the economy of Greece could recover and return to long term equilibrium with a speed of adjustment 18.78 per cent per annum under certain circumstances.
Gradually, as the economy returns to stability, the implementation of a less corrosive tax policy must be applied to make it more attractive to foreign tourists and more competitive in exports of primary sector products.