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An alternative view of tax incidence analysis for developing countries

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  • Shah, Anwar
  • Whalley, John

Abstract

Despite decades of studies, tax incidence analyses for developing countries continue to be based on the same shifting assumptions used in developed country studies - despite obvious pitfalls. Taxes are assumed to be shifted forward to consumers or backward onto factor incomes. Developing countries typically have a much different nontax and regulatory policy than developed countries with such features as more protection, rationed foreign exchange, price controls, black markets, and credit rationing. The authors argue that these features can greatly complicate the incidence effects of taxes in developing countries. They also discuss the implications of their findings for country lending programs and comment on how the extent to which nontax policy reform has already been implemented affects the significance of the points raised in this paper.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 462.

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Date of creation: 31 Jul 1990
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Handle: RePEc:wbk:wbrwps:462

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Keywords: Environmental Economics&Policies; Economic Theory&Research; Public Sector Economics&Finance; Banks&Banking Reform; Taxation&Subsidies;

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References

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  1. Piggott, John & Whalley, John, 1987. "Interpreting Net Fiscal Incidence Calculations," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 685-94, November.
  2. Davies, James B & St-Hilaire, France & Whalley, John, 1984. "Some Calculations of Lifetime Tax Incidence," American Economic Review, American Economic Association, vol. 74(4), pages 633-49, September.
  3. Nguyen, Trien T. & Whalley, John, 1986. "Equilibrium under price controls with endogenous transactions costs," Journal of Economic Theory, Elsevier, vol. 39(2), pages 290-300, August.
  4. Ahmad, Ehtisham & Stern, Nicholas, 1990. "Tax Reform and Shadow Prices for Pakistan," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 135-59, January.
  5. Mohammad, Sharif & Whalley, John, 1984. "Rent Seeking in India: Its Costs and Policy Significance," Kyklos, Wiley Blackwell, vol. 37(3), pages 387-413.
  6. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521319867, 9.
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  8. Nair, Govindan & Filippides, Anastasio, 1988. "How much do state-owned public enterprises contribute to public sector deficits in developing countries - and why?," Policy Research Working Paper Series 45, The World Bank.
  9. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "General Equilibrium Analysis of Tax Policies," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 6-24 National Bureau of Economic Research, Inc.
  10. Auerbach, Alan, 1990. "The cost of capital and investment in developing countries," Policy Research Working Paper Series 410, The World Bank.
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  12. Chaudry-Shah, Anwar, 1988. " Capitalization and the Theory of Local Public Finance: An Interpretive Essay," Journal of Economic Surveys, Wiley Blackwell, vol. 2(3), pages 209-43.
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  16. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  17. John Whalley, 1984. "Regression or Progression: The Taxing Question of Incidence Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 17(4), pages 654-82, November.
  18. Bovenberg, A.L., 1987. "Indirect taxation in developing countries: A general equilibrium approach," Open Access publications from Tilburg University urn:nbn:nl:ui:12-152947, Tilburg University.
  19. Bird, Richard M & Miller, Barbara Diane, 1989. "The Incidence of Indirect Taxes on Low-Income Households in Jamaica," Economic Development and Cultural Change, University of Chicago Press, vol. 37(2), pages 393-409, January.
  20. Heady, Christopher, 1987. "Designing Taxes with Migration," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 97(388a), pages 87-98, Supplemen.
  21. St-Hilaire, France & Whalley, John, 1983. "A Microconsistent Equilibrium Data Set for Canada for Use in Tax Policy Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 29(2), pages 175-204, June.
  22. McLure, Charles Jr., 1977. "Taxation and the urban poor in developing countries," World Development, Elsevier, vol. 5(3), pages 169-188, March.
  23. Ziderman, Adrian, 1989. "Payroll taxes for financing training in developing countries," Policy Research Working Paper Series 141, The World Bank.
  24. Imam, M Hasan & Whalley, John, 1985. "Incidence Analysis of a Sector-specific Minimum Wage in a Two-Sector Harris-Todaro Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(1), pages 207-24, February.
  25. Mohammad, Sharif & Whalley, John, 1985. "Controls and the Intersectoral Terms of Trade: The Indian Case," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 95(379), pages 759-66, September.
  26. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
  27. Anwar M. Chaudry-Shah, 1989. "A Capitalization Approach to Fiscal Incidence at the Local Level," Land Economics, University of Wisconsin Press, vol. 65(4), pages 359-375.
  28. John Whalley, 1989. "Recent Trade Liberalization in the Developing World: What is Behind It, and Where is it Headed?," NBER Working Papers 3057, National Bureau of Economic Research, Inc.
  29. Pinto, Brian, 1988. "Black market premia, exchange rate unification, and inflation in sub-Saharan Africa," Policy Research Working Paper Series 37, The World Bank.
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  32. McLure, Charles E, Jr & Thirsk, Wayne R, 1978. "The Inequity of Taxing Iniquity: A Plea for Reduced Sumptuary Taxes in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 26(3), pages 487-503, April.
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Citations

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Cited by:
  1. Renelt, David, 1991. "Economic growth : a review of the theoretical and empirical literature," Policy Research Working Paper Series 678, The World Bank.
  2. World Bank, 2000. "Thailand : Public Finance Review," World Bank Other Operational Studies 14508, The World Bank.
  3. Levine, Ross & Renelt, David, 1991. "Cross-country studies of growth and policy : methodological, conceptual, and statistical problems," Policy Research Working Paper Series 608, The World Bank.
  4. Sennoga, Edward B. & Matovu, John Mary & Twimukye, Evarist P., 2009. "Tax evasion and widening the tax base in Uganda," Research Series, Economic Policy Research Centre (EPRC) 54802, Economic Policy Research Centre (EPRC).

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