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Advancing Inclusive Growth in Cambodia

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  • Mr. Niels-Jakob H Hansen
  • Albe Gjonbalaj

Abstract

We evaluate the impact of fiscal reforms on growth and inequality in Cambodia using a calibrated general equilibrium model with heterogeneous agents (Peralta-Alva et al., 2018). Over the last two decades, Cambodia’s consumption inequality and poverty have declined. However, income inequality is higher, and large gaps remain between urban and rural residents. At the same time, domestic revenue mobilization has improved substantially, but collection of tax revenue is biased towards non-progressive sources. We use the model to evaluate the growth and inequality impact of reforms that increase infrastructure spending by raising (i) VAT, (ii) property tax, or (iii) personal income tax. We find that using property taxes delivers the largest increase in GDP and reduction in inequality. Reaping the gains from property taxation will however require additional investments in tax administration.

Suggested Citation

  • Mr. Niels-Jakob H Hansen & Albe Gjonbalaj, 2019. "Advancing Inclusive Growth in Cambodia," IMF Working Papers 2019/187, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2019/187
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    References listed on IDEAS

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    1. Mr. Manuk Ghazanchyan & Ricardo Marto & Jiri Jonas & Kaitlyn Douglass, 2017. "Collect More, Spend Better: Public Investment in Asian Frontier Markets," IMF Working Papers 2017/010, International Monetary Fund.
    2. César Calderón & Enrique Moral‐Benito & Luis Servén, 2015. "Is infrastructure capital productive? A dynamic heterogeneous approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(2), pages 177-198, March.
    3. Mr. Adrian Peralta Alva & Ms. Marina Mendes Tavares & Xuan S. Tam & Xin Tang, 2018. "The Macroeconomic and Distributional Implications of Fiscal Consolidations in Low-income Countries," IMF Working Papers 2018/146, International Monetary Fund.
    4. Jens Matthias Arnold & Bert Brys & Christopher Heady & Åsa Johansson & Cyrille Schwellnus & Laura Vartia, 2011. "Tax Policy for Economic Recovery and Growth," Economic Journal, Royal Economic Society, vol. 121(550), pages 59-80, February.
    5. Wang, Chen & Caminada, Koen, 2011. "Disentangling income inequality and the redistributive effect of social transfers and taxes in 36 LIS countries," MPRA Paper 32821, University Library of Munich, Germany.
    6. Frederick Solt, 2016. "The Standardized World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 97(5), pages 1267-1281, November.
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