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Tax Structure and Economic Growth in Cote dIvoire: Are Some Taxes Better Than Others?

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  • Yaya KEHO

    ()
    (Ecole Nationale Supérieure de Statistique et d’Economie Appliquée Côte d’Ivoire)

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    Abstract

    This paper examines the relationships between taxation and output in Côte d’Ivoire during the period 1960-2006. The bounds testing approach to cointegration devised by Pesaran et al. (2001) showed that tax variables, except direct tax, and real GDP are cointegrated and positively related in the long-run. The results of Granger causality tests indicated bidirectional causality between tax revenues and output in the long-run, implying a virtuous circle of tax and GDP. Direct taxes, however, did not cause GDP both in the short and long-run. These findings suggest that i) the tax revenues and, therefore, budget deficit, depend upon the economic activity, and ii) switching the tax burden from direct to indirect taxes is likely to have a positive effect on the economic output.

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    Bibliographic Info

    Article provided by Asian Economic and Social Society in its journal Asian Economic and Financial Review.

    Volume (Year): 1 (2011)
    Issue (Month): 4 (December)
    Pages: 226-235

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    Handle: RePEc:asi:aeafrj:2011:p:226-235

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    Related research

    Keywords: Taxes; economic growth; Cointegration; Granger causality;

    References

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    2. Paul Cashin, 1994. "Government Spending, Taxes, and Economic Growth," IMF Working Papers 94/92, International Monetary Fund.
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    4. Robert J. Barro & Xavier Sala-i-Martin, 1990. "Public Finance in Models of Economic Growth," NBER Working Papers 3362, National Bureau of Economic Research, Inc.
    5. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
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