Author(s)

Yiming Ding ¹

Affiliation(s)

¹ Business School, East China University of Political Science and Law, Shanghai, 201620, China

Corresponding Author

Yiming Ding

ABSTRACT

This study employs panel data of China's 31 provincial administrative units over the period 2001–2022 to examine how macro tax burden interacts with economic growth. Taking fiscal spending as the core transmission mechanism, this research applies a two-way fixed-effects model to evaluate the economic impacts of broad-caliber tax burden. The empirical outcomes confirm an inverted U-shaped correlation between macro tax burden and economic growth, which still holds after addressing endogeneity and conducting multiple robustness checks. The estimated optimal tax burden ratio for the whole country falls between 17% and 24%. Furthermore, macro tax burden influences economic development via fiscal spending and industrial restructuring, whereas the transmission role of technological innovation has not been observed yet. In addition, the linkage between tax burden and economic growth presents distinct characteristics across different areas of China.

KEYWORDS

Macro - tax burden; Economic growth; Fiscal expenditure

CITE THIS PAPER

Yiming Ding. Study on the Inverted "U" - Shaped Relationship between Macro - Tax Burden and Economic Growth - An Empirical Test Based on Chinese Provincial Panel Data. Financial Engineering and Risk Management (2026). Vol. 9, No. 1, 74-84. DOI: http://dx.doi.org/10.23977/ferm.2026.090107.

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