Taxation and Output Growth: Evidence from African Countries /
Skinner, Jonathan S.
Taxation and Output Growth: Evidence from African Countries / Jonathan S. Skinner. - Cambridge, Mass. National Bureau of Economic Research 1987. - 1 online resource: illustrations (black and white); - NBER working paper series no. w2335 . - Working Paper Series (National Bureau of Economic Research) no. w2335. .
August 1987.
There is considerable debate over the appropriate role for tax policy in developing economies. In one view, tax hikes reduce deficits and ease budgetary pressures, thereby encouraging long-term growth. An alternative view emphasizes the distortionary effects associated with increased taxation and the positive benefits of a carefully designed tax system. This paper tests these propositions by measuring the impact of government taxation and expenditure on aggregate output growth. A theoretical model is derived which shows that the impact of tax distortions on output growth is usually negative. The theoretical model is tested using a pooled cross-section time-series data set for 31 sub-Saharan African countries during 1965-73 and 1974-82. The regressions imply that the positive benefits of government investment during 1965-73 outweighed the distortionary effects of taxes necessary to finance them. By 1974-82, however, the marginal productivity of government investment had fallen; tax-financed public investment was predicted to have reduced output growth. The empirical results also imply that a revenue neutral shift from the import, corporate, and personal tax to a sales/excise (or consumption) tax will encourage output growth.
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Mode of access: World Wide Web.
Taxation and Output Growth: Evidence from African Countries / Jonathan S. Skinner. - Cambridge, Mass. National Bureau of Economic Research 1987. - 1 online resource: illustrations (black and white); - NBER working paper series no. w2335 . - Working Paper Series (National Bureau of Economic Research) no. w2335. .
August 1987.
There is considerable debate over the appropriate role for tax policy in developing economies. In one view, tax hikes reduce deficits and ease budgetary pressures, thereby encouraging long-term growth. An alternative view emphasizes the distortionary effects associated with increased taxation and the positive benefits of a carefully designed tax system. This paper tests these propositions by measuring the impact of government taxation and expenditure on aggregate output growth. A theoretical model is derived which shows that the impact of tax distortions on output growth is usually negative. The theoretical model is tested using a pooled cross-section time-series data set for 31 sub-Saharan African countries during 1965-73 and 1974-82. The regressions imply that the positive benefits of government investment during 1965-73 outweighed the distortionary effects of taxes necessary to finance them. By 1974-82, however, the marginal productivity of government investment had fallen; tax-financed public investment was predicted to have reduced output growth. The empirical results also imply that a revenue neutral shift from the import, corporate, and personal tax to a sales/excise (or consumption) tax will encourage output growth.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.