This paper takes on this challenge by focusing on 51 countries (21 industrial and 30 developing) for the period 1970-2014. Given the lack of readily-available data on average marginal individual and/or corporate income tax rates on a global scale, we focus our e¤orts on building a new series for quarterly standard value-added tax rates (henceforth VAT rates). We believe that this signi...cant e¤ort in collecting VAT rates is crucial for any study analyzing tax policy in Europe as well as in the developing world, where indirect/value-added taxation is the main tax revenue instrument.<sup>4</sup> VAT rates were obtained from various primary sources including countries’revenue agencies, national libraries, books, newspapers, tax law experts, and research and policy papers. We identify a total of 96 VAT rate changes in 35 countries (18 industrial and 17 developing). As sources for the narrative analysis, we use contemporaneous International Monetary Fund (IMF) documents, OECD Economic Surveys, and news articles to gather evidence on policymakers’intentions and primary motivation behind each VAT rate change.

While closely following RR’s identi...cation strategy, we also incorporate some new elements that arise due both the global nature of our sample of countries and the speci...c tax measure used. In particular, we allow endogenous tax changes to include countercyclical tax changes (as in RR) as well as procyclical tax changes. While the latter type of policy behavior is not found by RR in the U.S., it is of critical importance in the developing world as well as in many other industrial countries (particularly industrial European countries after the 2007-2008 Global Financial Crisis). When focusing on exogenous tax changes motivated by inherited ...scal factors, we consider inherited de...cit-driven tax changes (as in RR) as well as inherited debt-driven tax changes. Since, over the last 60 years, the U.S. has not faced sustainability problems regarding the public debt, RR do not concern themselves with the latter case. As our analysis will show, however, this distinction has important implications in terms of the size of the tax multipliers in our sample.

Relying on our novel worldwide narrative approach, we ...nd that, for the entire global sample, the tax multiplier reaches �1:7 after two years of the tax shock. This ...gure is, compared to the range of estimated tax multipliers depicted before, among the least negative ones. Interestingly, when splitting the sample into industrial European economies and the rest of countries, we ...nd tax multipliers of �3:6 and �1:2, respectively. While the tax multiplier in industrial European economies is quite negative and statistically signi...cant (in line with recent studies), it is about 3 times smaller (in absolute value) and borderline statistically signi...cant for the rest of countries.

Motivated by this large di¤erence in tax multipliers, the paper’s main empirical contribution consists in evaluating the role of tax distortions and disincentives in generating non-linear e¤ects of tax changes on output. Many di¤erent kinds of non-linearities have been found in the estimation of spending multipliers in recent years. In most cases, the non-linear e¤ect of spending on output has been asso-

> 4 When analyzing the impact of speci...c taxes, Barro and Redlick (2011) focus on the e¤ect of individual income and social-security payroll taxes in the U.S. Mertens and Ravn (2013) analyze the e¤ect of individual and corporate income taxes in the U.S. Riera-Crichton, Vegh, and Vuletin (2016) focus on the impact of VAT in 14 industrial countries.

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