Optimal Taxation for Economic Growth in Uzbekistan: Evidence from Alternative Nonlinear Specifications

This study estimates the growth-maximizing tax burden in Uzbekistan using annual data for the period 1997–2025. To ensure the robustness of the findings, three complementary approaches are employed: a quadratic Ordinary Least Squares (OLS) model, the Scully growth model, and threshold regression analysis. The results provide consistent evidence of a nonlinear relationship between taxation and economic growth. The quadratic OLS and Scully models estimate the growth-maximizing tax burden within the range of 18–19% of GDP, while the threshold model identifies a structural breakpoint at approximately 22% of GDP. The findings suggest that moderate levels of taxation contribute positively to economic growth by supporting productive public expenditures, whereas the growth-enhancing effects of taxation weaken as the tax burden approaches the estimated threshold. The study contributes to the literature on optimal taxation by providing updated evidence from a transition economy and offers policy implications for designing a growth-oriented tax system in Uzbekistan.

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