Demography and Inequality: The Effect of Tax Composition

Authors

  • Rajput Sheraz Karachi School of Business and Leadership, Pakistan.
  • Abdul Basit Memon Sukkur IBA University, Sukkur, Pakistan.
  • Rehan Tahir The Islamia University of Bahawalpur, Pakistan.
  • Kashif Raza The Islamia University of Bahawalpur, Bahawalnagar Campus, Pakistan.

DOI:

https://doi.org/10.52131/pjhss.2023.1104.0692

Keywords:

Aging Population, Direct Taxes, Indirect Taxes, Median Voter Model, Inequality, Democracy, OECD Countries

Abstract

This paper investigates how aging societies lead to worsen distribution of income through tax composition measured by ratio of direct taxes to indirect taxes. The rationale follows: due to the political power of working age population emanating from majority of their share in the population, in a median voter model, they manage to shift the tax burden on aged population in an aging society through increasing direct taxes more than indirect taxes. This results in elevating income inequality in society. To estimate our hypothesis, we apply panel data using time and country fixed effects. Based on sample covering 110 countries from 1990-2020 and applying different inequality measures and robustness check, the empirical evidence considerably supports this hypothesis. The results hold firmly across the OECD and non-OECD countries together with strong and weak democracies.

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Author Biographies

Rajput Sheraz, Karachi School of Business and Leadership, Pakistan.

Department of Business Administration

Abdul Basit Memon, Sukkur IBA University, Sukkur, Pakistan.

Department of Business Administration

Rehan Tahir, The Islamia University of Bahawalpur, Pakistan.

MS Scholar, Department of Administrative and Management Sciences

Kashif Raza, The Islamia University of Bahawalpur, Bahawalnagar Campus, Pakistan.

Department of Economics

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Published

2023-12-10

How to Cite

Sheraz, R., Memon, A. B., Tahir, R., & Raza, K. (2023). Demography and Inequality: The Effect of Tax Composition. Pakistan Journal of Humanities and Social Sciences, 11(4), 4290–4300. https://doi.org/10.52131/pjhss.2023.1104.0692

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