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Macroeconomic implications of Raising Income:The Nigerian Experience

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  • Okolo, Chimaobi
  • Attamah, Nicholas

Abstract

Government, factor owners and investors share an intersecting objective, which is to boost income, notwithstanding its implications on the macroeconomy of Nigeria. More recently is the government drive to raise tax income, accompanied by the labour union agitation for a 110% rise in federal minimum wage in Nigeria. In line with the United Nations sustainable development goal 9, which is to build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation, this study evaluates the macroeconomic implication of raising income in order to achieve this goal in Nigeria. This study makes significant innovation in the unique adoption of minimum wage on labour productivity ratio, tax burden and capital utilization ratio to explain the variations in productivity and output growth in Nigeria. Over the 33 year period, minimum wage increase has caused an average of 12.33% significant reduction in labour productivity, 4.59% decline in capital productivity and 2.56% reduction in real output growth in Nigeria. In the same period, tax burden caused an average of 1.71%, 6.95% and 12.26% increase in the real output growth, labour productivity growth and growth in capital productivity respectively. Capital utilization on the average caused 2.83% increase in capital productivity growth, while declining real output growth by 0.52% in the same period. This signifies the need to boost tax income in the overall interest of productivity and output growth, which could lead to the achieving the UN-SDG-9

Suggested Citation

  • Okolo, Chimaobi & Attamah, Nicholas, 2018. "Macroeconomic implications of Raising Income:The Nigerian Experience," MPRA Paper 89640, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:89640
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Capital; income; labour; minimum wage; productivity; tax burden;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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