Table 4: Johansen Trace Test and Maximum Eigenvalue Test Results ( For Ln(realT) and Ln(realTI) )
|
Trace test | |||
|
Null (H0) Hypothesis |
Alternative (H1) Hypothesis |
Test Statistics |
%5 Critical Value |
|
r=0 |
r≥1 |
24,8171* |
20,261 |
|
r≤1 |
r≥2 |
3,7392 |
9,1645 |
|
Maximum Eigenvalue Test | |||
|
Null (H0) Hypothesis |
Alternative (H1) Hypothesis |
Test Statistics |
%5 Critical Value |
|
r=0 |
r=1 |
21,07785* |
15,8921 |
|
r≤1 |
r=2 |
3,7392 |
9,1645 |
* Denotes the rejection of the null hypothesis at the 0, 05 level
To find the income tax elasticity, we need to estimate equation (3). Table 5 shows the results of the cointegration
analysis of this equation, between the variables of real income taxable income and the real GNP (Y). The optimal
lag number for this equation is found to be 1 and Johansen trace test and maximum eigenvalue tests indicate
evidence of one cointegrating vector in the system.
The normalized cointegrating vector for equation 3 is:
Ln Real TI = 0,26339 + 0,980447 Ln Real Y
(0,6344) (0,05620)
The coefficient of real GNP is statistically significant at %5 level.
Table 5: Johansen Trace Trace and Maximum Eigenvalue Test Results ( For Ln(realTI) and Ln(realY) )
|
Trace test | |||
|
Null (H0) Hypothesis |
Alternative (H1) Hypothesis |
Test Statistics |
%5 Critical Value |
|
r=0 |
r≥1 |
23,03424* |
20,261 |
|
r≤1 |
r≥2 |
2,3599 |
9,1645 |
|
Maximum Eigenvalue Test | |||
|
Null (H0) Hypothesis |
Alternative (H1) Hypothesis |
Test Statistics |
%5 Critical Value |
|
r=0 |
r=1 |
20,67433* |
15,8921 |
|
r≤1 |
r=2 |
2,3599 |
9,1645 |
* Denotes the rejection of the null hypothesis at the 0, 05 level.
As we have estimated the coefficients from equation (2) and (3), we can calculate the long run income tax elasticity
by multiplying these two coefficients.
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