What is Cross-Section Dependency

The aim of this chapter is to investigate the potential impacts of globalization on tax revenues with reference to theoretical explanations within the context of tax and globalization. In the study, G10 country group and the data belonging to these countries between the years of 1990 and 2015 are used. In order to determine the relationships between tax revenues and globalization, cross-sectional dependency test, slope heterogeneous tests, and bootstrap panel Granger causality tests were used to understand the direction of causality between long-term coefficient estimations and variables. While the results of the long-run coefficient obtained from the study show differences according to the countries, a bi-directional causality relationship is determined between tax revenues and foreign trade. The diminishing effect of globalization found on the tax revenues of nation states considered within the scope of the study. It can be thought that these outcomes may provide some preliminary information to policymakers.