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Using surveys of business perceptions as a guide to growth-enhancing fiscal reforms

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  • Misch, Florian
  • Gemmell, Norman
  • Kneller, Richard

Abstract

This paper assesses the merits of using surveys of business perceptions of growth constraints as a guide to growth-enhancing fiscal policy reforms. Using endogenous growth models in which the government levies an income tax to provide public inputs to the production of private firms, the paper demonstrates that business perceptions of growth constraints are subject to systematic biases except when firms compare different types of public services or different types of public capital. In particular firms can be expected to systematically over-estimate the growth-enhancing effects of lower tax rates, and under-estimate the growth-enhancing effects of greater provision of public capital. It is then shown that these theoretical predictions regarding how firms rank constraints correspond closely to the observed ranking of constraints by firms in the World Bank's Enterprise Surveys.

Suggested Citation

  • Misch, Florian & Gemmell, Norman & Kneller, Richard, 2013. "Using surveys of business perceptions as a guide to growth-enhancing fiscal reforms," ZEW Discussion Papers 13-012, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:13012
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    References listed on IDEAS

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    1. Florian Misch & Norman Gemmell & Richard Kneller, 2013. "Growth and Welfare Maximization in Models of Public Finance and Endogenous Growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(6), pages 939-967, December.
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    6. Semmler, Willi & Greiner, Alfred & Diallo, Bobo & Rezai, Armon & Rajaram, Anand, 2007. "Fiscal policy, public expenditure composition, and growth theory and empirics," Policy Research Working Paper Series 4405, The World Bank.
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    11. Misch Florian & Gemmell Norman & Kneller Richard, 2010. "Binding Constraints and Second-Best Strategies in Endogenous Growth Models with Public Finance," Journal of Globalization and Development, De Gruyter, vol. 1(2), pages 1-37, December.
    12. Ricardo Hausmann & Bailey Klinger & Rodrigo Wagner, 2008. "Doing Growth Diagnostics in Practice: A 'Mindbook'," CID Working Papers 177, Center for International Development at Harvard University.
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    16. Hallward-Driemeier, Mary & Aterido, Reyes, 2009. "Comparing Apples with....Apples : how to make (more) sense of subjective rankings of constraints to business," Policy Research Working Paper Series 5054, The World Bank.
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    Cited by:

    1. Era Dabla-Norris & Mark Gradstein & Fedor Miryugin & Florian Misch, 2019. "Productivity and Tax Evasion," CESifo Working Paper Series 8002, CESifo.
    2. Klaus S. Friesenbichler & Oliver Fritz & Werner Hölzl & Gerhard Streicher & Florian Misch & Mustafa Yeter, 2014. "The Efficiency of EU Public Administration in Helping Firms Grow," WIFO Studies, WIFO, number 50931, Juni.
    3. Friesenbichler, Klaus & Fritz, Oliver & Hölzl, Werner & Misch, Florian & Streicher, Gerhard & Yeter, Mustafa, 2014. "The efficiency of EU public administration in helping firms grow: Final report," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 111450.

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    More about this item

    Keywords

    Economic Growth; Fiscal Policy; Imperfectly Informed Governments; Business Perceptions; Diagnostics; Subjective Data;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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