TY  - JOUR
AU  - Skinner,Jonathan S.
TI  - Taxation and Output Growth:  Evidence from African Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2335
PY  - 1987
Y2  - August 1987
UR  - http://www.nber.org/papers/w2335
L1  - http://www.nber.org/papers/w2335.pdf
N1  - Author contact info:
Jonathan S. Skinner
Department of Economics
6106 Rockefeller Hall
Dartmouth College
Hanover, NH 03755
Tel: 603/646-2535
Fax: 603/646-2122
E-Mail: jonathan.skinner@dartmouth.edu
AB  - 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.
ER  -