Africa's Growth Trap: A Political-Economy Model of Taxation, R&D and Investment
AbstractWhy do so many African governments consistently impose high tax rates and make little investment in productive public goods, when alternative policies could yield greater tax revenues and higher national income? We posit and test an intertemporal political economy model in which the government sets tax and R&D levels while investors respond with production. Equilibrium policy and growth rates depend on initial cost structure. We find that in many (but not all) African countries, low tax/high investment regimes would be time-inconsistent. For pro-growth policies to become sustainable, commitment mechanisms or new production techniques would be needed.
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Bibliographic InfoPaper provided by Center for International Development at Harvard University in its series CID Working Papers with number 50.
Date of creation: Jun 2000
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time consistency; agricultural policy; economic growth;
Other versions of this item:
- Margaret S. McMillan & William A. Masters, 2000. "Africa's growth trap: a political-economy model of taxation, R&D and investment," CSAE Working Paper Series 2000-14, Centre for the Study of African Economies, University of Oxford.
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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