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Tax Revenue, Infrastructural Development and Economic Growth In Nigeria

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  • Ayeni, Oluwasegun David
  • Afolabi, Olarewaju Joseph

Abstract

Extant literatures have found that tax revenue influence infrastructure and economic growth without considering if infrastructure can possibly affect the tax revenue collected. This study examined the dynamic relationship between tax revenue, infrastructural development and economic growth in Nigeria, using an annual secondary time series data from 1981 – 2018. The unit root properties of the series were examined using both Augmented Dickey Fuller (ADF) test and Phillip Perron (PP) test, while the Johansen Cointegration test was employed to examine if the series are cointegrated. The results reveal that the series are all integrated of order 1 and non cointegrated. To examine the direction of causality and the interrelationship among the variables, a vector autoregression (VAR) causality test was carried out, and a VAR at-first difference model was estimated. The results reveal a unidirectional causality running from tax revenue to economic growth and from economic growth to infrastructure, while a bi-directional causality is found between tax revenue and infrastructural development. Findings from the impulse response results show that while tax revenue influences economic growth and infrastructure, infrastructure does not influence economic growth, but significantly influence tax revenue collected. The study recommends that government should better embrace fiscal responsibility by being more accountable to tax payers in terms of providing infrastructures of higher quality that can truly promote economic growth.

Suggested Citation

  • Ayeni, Oluwasegun David & Afolabi, Olarewaju Joseph, 2020. "Tax Revenue, Infrastructural Development and Economic Growth In Nigeria," MPRA Paper 99464, University Library of Munich, Germany, revised 2020.
    • Handle: RePEc:pra:mprapa:99464
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    References listed on IDEAS

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    2. O. Owolabi-Merus, 2015. "Infrastructure Development and Economic Growth Nexus in Nigeria," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(1), pages 376-382, January.
    3. Pradhan, Rudra P. & Bagchi, Tapan P., 2013. "Effect of transportation infrastructure on economic growth in India: The VECM approach," Research in Transportation Economics, Elsevier, vol. 38(1), pages 139-148.
    4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    5. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    6. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Ifeoma Osamor & Godwin Omoregbee & Fadekemi Ajasa-Adeoye & Josephine Olumuyiwa-Loko, 2023. "Tax Revenue and Economic Growth: Empirical Evidence from Nigeria," Journal of Economics and Behavioral Studies, AMH International, vol. 15(1), pages 15-26.
    2. Adejare Adegbite Tajudeen, 2021. "Taxation and Transportation: Granger Causality Approach in Nigeria," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 31(3), pages 1-20, September.
    3. Kadijat Adeleke, Oluwayemisi & Abamba Osakede, Uche & Monisola Ajeigbe, Omowunmi, 2021. "Trade Liberalization And Infrastructure Development: Evidence From The Economic Community Of West African States," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 8(3), pages 1-20, June.

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    More about this item

    Keywords

    Tax Revenue; Infrastructural Development; Economic Growth; VAR.;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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