An Alternative View of Tax Incidence Analysis for Developing Countries

Anwar Shah, John Whalley

NBER Working Paper No. 3375
Issued in June 1990
NBER Program(s):International Trade and Investment Program, Public Economics Program, International Finance and Macroeconomics Program

This paper revisits the long-standing issue of the incidence of taxes in developing countries. Its central theme is that despite many decades of studies, tax incidence analyses for developing countries continue to be based upon the same shifting assumptions used in developed country studies, despite some obvious pitfalls. Taxes are assumed to be shifted forward to consumers, or backwards onto factor incomes, as has been the case for developed country tax incidence work from Bowley and Stamp to Peclunan and Okner. Developing countries typically have a much different non-tax policy and regulatory environment from developed countries, with higher protection, rationed foreign exchange, price controls, black markets, credit rationing and many other features. The paper argues that all these features can greatly complicate and even obscure the incidence effects of taxes in developing countries. For several taxes, taking such features into account can reverse signs and/or substantially revise estimates of incidence effects from conventional thinking and by substantial orders of magnitude. A final section sets out some implications for country lending programs, both by type of country and level of development, and comments on how the extent to which non-tax policy reform has already been implemented affects the significance of the points raised here.

download in pdf format
   (407 K)

download in djvu format
   (382 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3375

Published: World Bank Economic Review, vol. 5, no. 3, September 1991

Users who downloaded this paper also downloaded* these:
Fullerton and Metcalf w8829 Tax Incidence
Metcalf and Fullerton w8978 The Distribution of Tax Burdens: An Introduction
Nathan The Sources of Government Revenue
Kotlikoff and Summers w1864 Tax Incidence
Caspersen and Metcalf w4387 Is A Value Added Tax Progressive? Annual Versus Lifetime Incidence Measures
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us