How does the Relationship between Income Tax and Unemployment effect the Economic Growth? (Research Proposal Sample)

How does the Relationship between Income Tax and Unemployment effect the Economic Growth
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Abstract
Taxes, unemployment, and economic growth form the basis of ascertaining the wellbeing of countries globally. The economic strength of a country determines the revenue available for running public services whereby the amount of the available revenue is subject to taxes and taxation policies in place. The labor market, on the other hand, plays a significant role in determining the productivity of a country, and it’s reflected in the Gross Domestic Product of the economy. Economically, there exists a relationship between income tax and unemployment, and the relationship differently impacts the general economic growth across nations. Studying and ascertaining the impacts of this relationship to the economic growth will guide learners to the understanding of the contextual application of macroeconomic parameters. The study will provide policy makers and other stakeholders a benchmark in their legislative and sectorial decisions that ultimately contribute to the overall status of an economy. The study intends to employ inferential statistics approach to analyze how the relationship affect economic growth whereby income tax rates, unemployment rate statistics and the corresponding economic growth data will be used. The study intends to liaise with the department of labor and the Treasury to access the data (50 years period) and analyze using the Pearson product-moment analysis and a statistical two-tail test for statistical significance and to ascertain the direction of correlation with reference to the economic growth. The study will later disseminate its findings to academic institutions and government agencies for appropriate action.
Introduction
Studies have indicated different taxation policies result to different unemployment rate and different economic growth patterns accordingly. Tax Foundation (2011) found a significant negative correlation between income tax and unemployment from years1948 to 2011 in that raising taxes resulted in low unemployment and lowering taxes resulted in higher unemployment rates within that period. In economic terms when taxes are raised, it indicates economic strength whereas low income tax rates indicates a weaker economy. Though the correlation is not causation, the economic growth followed inconclusive paths that were not directly proportional with the relationship. In another study by the United States Department of Labor, Bureau of Labor Statistics (2011) found a causal relationship between income tax and unemployment which in turn resulted to skewed productivity patterns that affected the overall economic growth.
Research Questions and Hypothesis
To examine how the relationship between income tax and unemployment effects the economic growth, the study will seek to find the correlation direction of the relationship towards economic growth by answering the following questions
* Does an increase in income tax rate affect unemployment in the same magnitude as the economic growth
* Is lowering or increasing of the income tax rates and the corresponding shifts in unemployment rate represent a statistical measure of economic growth and strength
* Do the adjustments of income tax rate show uniform results across all states considering different labor regulations and standards
* If the relationship between income tax and unemployment is causal would unemployment be a statistical parameter to ascertain the wellbeing of an economy
* Is the relationship largely affected by external factors such as political and legislative policies and how to balance them for accelerated and sustainable economic growth
Study Design
The study will ascertain the effects of the relationship to the economic growth through an econometric model that will be deterministic in nature considering the existing relationship between income tax and unemployment. To statistically validate and to provide an alternative measure, the study intends to adjust the econometric model to a fit a stochastic approach that will eliminate the predictability of the variables. The models will be inferentially evaluated to ascertain and validate the uncertainty about the value of parameters and to eradicate the political arguments and assumptions based on the rate of unemployment and income tax adjustments in relation to the predictive economic growth. The study will collect the ...