IDEAS home Printed from https://ideas.repec.org/a/eee/deveco/v98y2012i2p220-227.html
   My bibliography  Save this article

An instrumental variables approach to estimating tax revenue elasticities: Evidence from Sub-Saharan Africa

Author

Listed:
  • Brückner, Markus

Abstract

This paper exploits the significant response of real GDP growth of Sub-Saharan African countries to exogenous international commodity price and rainfall shocks to construct instrumental variables estimates of the tax revenue elasticity IV estimates yield that a 1% increase in GDP increases tax revenues by up to 2.5%.

Suggested Citation

  • Brückner, Markus, 2012. "An instrumental variables approach to estimating tax revenue elasticities: Evidence from Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 98(2), pages 220-227.
  • Handle: RePEc:eee:deveco:v:98:y:2012:i:2:p:220-227
    DOI: 10.1016/j.jdeveco.2011.07.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304387811000812
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jdeveco.2011.07.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Angus Deaton, 2005. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 1-19, February.
    2. Deaton, Angus & Miller, Ron, 1996. "International Commodity Prices, Macroeconomic Performance and Politics in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 5(3), pages 99-191, October.
    3. Angus Deaton, 1999. "Commodity Prices and Growth in Africa," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 23-40, Summer.
    4. Mehmet Serkan Tosun & Sohrab Abizadeh, 2005. "Economic growth and tax components: an analysis of tax changes in OECD," Applied Economics, Taylor & Francis Journals, vol. 37(19), pages 2251-2263.
    5. Paul Cashin & Hong Liang & C. John McDermott, 2000. "How Persistent Are Shocks to World Commodity Prices?," IMF Staff Papers, Palgrave Macmillan, vol. 47(2), pages 1-2.
    6. Johnson, Simon & Larson, William & Papageorgiou, Chris & Subramanian, Arvind, 2013. "Is newer better? Penn World Table Revisions and their impact on growth estimates," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 255-274.
    7. Adam, Christopher S. & Bevan, David L. & Chambas, Gerard, 2001. "Exchange rate regimes and revenue performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 64(1), pages 173-213, February.
    8. Heston, Alan, 1994. "A brief review of some problems in using national accounts data in level of output comparisons and growth studies," Journal of Development Economics, Elsevier, vol. 44(1), pages 29-52, June.
    9. Markus Brückner & Antonio Ciccone, 2010. "International Commodity Prices, Growth and the Outbreak of Civil War in Sub-Saharan Africa," Economic Journal, Royal Economic Society, vol. 120(544), pages 519-534, May.
    10. Salvador Barrios & Luisito Bertinelli & Eric Strobl, 2010. "Trends in Rainfall and Economic Growth in Africa: A Neglected Cause of the African Growth Tragedy," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 350-366, May.
    11. Donald Bruce & William F. Fox & M.H. Tuttle, 2006. "Tax Base Elasticities: A Multi-State Analysis of Long-Run and Short-Run Dynamics," Southern Economic Journal, John Wiley & Sons, vol. 73(2), pages 315-341, October.
    12. Angus Deaton, 2005. "ERRATUM: Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 395-395, May.
    13. Shamsuddin Tareq & Andrew Berg & Victor Duarte Lledo & Antonio Spilimbergo & Rolando Ossowski & Irene Yackovlev & Norbert Funke & Alejandro Hajdenberg & Martin Schindler, 2009. "Fiscal Policy in Sub-Saharan Africa in Response to the Impact of the Global Crisis," IMF Staff Position Notes 2009/10, International Monetary Fund.
    14. Paul van den Noord, 2000. "The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond," OECD Economics Department Working Papers 230, OECD Publishing.
    15. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October.
    16. Mr. Dhaneshwar Ghura, 1998. "Tax Revenue in Sub-Saharan Africa: Effects of Economic Policies and Corruption," IMF Working Papers 1998/135, International Monetary Fund.
    17. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
    18. Sobel, Russell S. & Holcombe, Randall G., 1996. "Measuring the Growth and Variability of Tax Bases over the Business Cycle," National Tax Journal, National Tax Association, vol. 49(4), pages 535-52, December.
    19. Guido Wolswijk, 2009. "The short- and long-run tax revenue response to changes in tax bases," Economics Bulletin, AccessEcon, vol. 29(3), pages 1960-1970.
    20. Markus Bruckner & Antonio Ciccone, 2010. "International Commodities Prices, Growth and the Outbreak of Civil War in Sub-Saharan Africa," Working Papers 1008, BBVA Bank, Economic Research Department.
    21. Sobel, Russell S. & Holcombe, Randall G., 1996. "Measuring the Growth and Variability of Tax Bases Over the Business Cycle," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(4), pages 535-552, December.
    22. Mr. Shamsuddin Tareq & Mr. Andrew Berg & Victor Duarte Lledo & Mr. Antonio Spilimbergo & Mr. Rolando Ossowski & Irene Yackovlev & Mr. Norbert Funke & Alejandro Hajdenberg & Mr. Martin Schindler, 2009. "Fiscal Policy in Sub-Saharan Africa in Response to the Impact of the Global Crisis," IMF Staff Position Notes 2009/010, International Monetary Fund.
    23. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 725-753, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jhorland Ayala-Garcia & Sandy Dall'Erba & William C. Ridley, 2021. "Externalities of extreme natural disasters on local tax capacity," Documentos de trabajo sobre Economía Regional y Urbana 299, Banco de la Republica de Colombia.
    2. Mertens, Karel & Ravn, Morten O., 2014. "A reconciliation of SVAR and narrative estimates of tax multipliers," Journal of Monetary Economics, Elsevier, vol. 68(S), pages 1-19.
    3. Jhorland Ayala‐García & Sandy Dall'Erba, 2022. "The impact of preemptive investment on natural disasters," Papers in Regional Science, Wiley Blackwell, vol. 101(5), pages 1087-1103, October.
    4. Andersson, Jens & Lazuka, Volha, 2019. "Long-term drivers of taxation in francophone West Africa 1893–2010," World Development, Elsevier, vol. 114(C), pages 294-313.
    5. Vivekananda Mukherjee, 2013. "Determinants of Stamp Duty Revenue in Indian States," South Asian Journal of Macroeconomics and Public Finance, , vol. 2(1), pages 33-58, June.
    6. Jean-François Brun & Gérard Chambas & Jules Tapsoba & Abdoul-Akim Wandaogo, 2020. "Are ICT's boosting tax revenues? Evidence from developing countries," CERDI Working papers hal-02979897, HAL.
    7. Serhan Cevik, 2018. "Unlocking Pakistan’s Revenue Potential," South Asian Journal of Macroeconomics and Public Finance, , vol. 7(1), pages 17-36, June.
    8. Wenéyam Hippolyte Balima & Jean‐Louis Combes & Alexandru Minea, 2016. "Bond Markets Initiation and Tax Revenue Mobilization in Developing Countries," Southern Economic Journal, John Wiley & Sons, vol. 83(2), pages 550-572, October.
    9. Mr. Serhan Cevik, 2016. "Unlocking Pakistan’s Revenue Potential," IMF Working Papers 2016/182, International Monetary Fund.
    10. Lagravinese, Raffaele & Liberati, Paolo & Sacchi, Agnese, 2020. "Tax buoyancy in OECD countries: New empirical evidence," Journal of Macroeconomics, Elsevier, vol. 63(C).
    11. Sanoh, Aly, 2015. "Rainfall Shocks, Local Revenues, and Intergovernmental Transfer in Mali," World Development, Elsevier, vol. 66(C), pages 359-370.
    12. Jean-François Brun & Gérard Chambas & Jules Tapsoba & Abdoul-Akim Wandaogo, 2020. "Are ICT's boosting tax revenues? Evidence from developing countries," Working Papers hal-02979897, HAL.
    13. Navarat Temsumrit, 2020. "Does Democracy Affect Cyclical Fiscal Policy? Evidence From Developing Countries," PIER Discussion Papers 125, Puey Ungphakorn Institute for Economic Research.
    14. Gradstein, Mark & Brückner, Markus, 2011. "Government Spending Cyclicality: Evidence from Rainfall Shocks as an Instrument for Cyclical Income," CEPR Discussion Papers 8622, C.E.P.R. Discussion Papers.
    15. Jhorland Ayala-García & Sandy Dall’Erba, 2021. "The impact of preemptive investment on natural disasters," Documentos de trabajo sobre Economía Regional y Urbana 301, Banco de la Republica de Colombia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brückner, Markus, 2012. "Economic growth, size of the agricultural sector, and urbanization in Africa," Journal of Urban Economics, Elsevier, vol. 71(1), pages 26-36.
    2. Lin, Faqin & Sim, Nicholas C.S., 2014. "Baltic Dry Index and the democratic window of opportunity," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 143-159.
    3. Markus Brückner & Antonio Ciccone, 2010. "International Commodity Prices, Growth and the Outbreak of Civil War in Sub-Saharan Africa," Economic Journal, Royal Economic Society, vol. 120(544), pages 519-534, May.
    4. Brückner, Markus & Gradstein, Mark, 2014. "Government spending cyclicality: Evidence from transitory and persistent shocks in developing countries," Journal of Development Economics, Elsevier, vol. 111(C), pages 107-116.
    5. Markus Brückner & Antonio Ciccone, 2011. "Rain and the Democratic Window of Opportunity," Econometrica, Econometric Society, vol. 79(3), pages 923-947, May.
    6. Bernd Hayo & Sascha Mierzwa & Umut Unal, 2021. "Estimating Policy-Corrected Long-Term and Short-Term Tax Elasticities for the United States, Germany, and the United Kingdom," MAGKS Papers on Economics 202112, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Brückner, Markus & Gradstein, Mark, 2013. "Exogenous volatility and the size of government in developing countries," Journal of Development Economics, Elsevier, vol. 105(C), pages 254-266.
    8. Brückner, Markus & Gradstein, Mark, 2013. "Effects of transitory shocks to aggregate output on consumption in poor countries," Journal of International Economics, Elsevier, vol. 91(2), pages 343-357.
    9. Burke Paul J., 2012. "Economic Growth and Political Survival," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-43, March.
    10. Markus Bruckner & Antonio Ciccone, 2010. "International Commodities Prices, Growth and the Outbreak of Civil War in Sub-Saharan Africa," Working Papers 1008, BBVA Bank, Economic Research Department.
    11. Markus Brückner, 2010. "Population Size and Civil Conflict Risk: Is there a Causal Link?," Economic Journal, Royal Economic Society, vol. 120(544), pages 535-550, May.
    12. Fricke, Hans & Süssmuth, Bernd, 2014. "Growth and Volatility of Tax Revenues in Latin America," World Development, Elsevier, vol. 54(C), pages 114-138.
    13. Francis Kwaw Andoh & Nehemiah E. Osoro & Eliab Luvanda, 2019. "Growth Dynamics of Value-Added Tax Revenue in Ghana," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(2), June.
    14. Raffaele Lagravinese & Paolo Liberati & Agnese Sacchi, 2016. "The growth and variability of local taxes: An application to the Italian regions," Working Papers. Collection B: Regional and sectoral economics 1601, Universidade de Vigo, GEN - Governance and Economics research Network.
    15. James Fenske & Namrata Kala, 2012. "Climate, ecosystem resilience and the slave trade," CSAE Working Paper Series 2012-23, Centre for the Study of African Economies, University of Oxford.
    16. Angus Deaton, 2010. "Understanding the Mechanisms of Economic Development," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 3-16, Summer.
    17. Matteo Lanzafame, 2014. "Temperature, rainfall and economic growth in Africa," Empirical Economics, Springer, vol. 46(1), pages 1-18, February.
    18. Faqin Lin & Ermias O. Weldemicael & Xiaosong Wang, 2017. "Export sophistication increases income in sub-Saharan Africa: evidence from 1981–2000," Empirical Economics, Springer, vol. 52(4), pages 1627-1649, June.
    19. Samuel Guérineau & Hélène Ehrhart, 2012. "The impact of high and volatile commodity prices on public finances: Evidence from developing countries," CERDI Working papers halshs-00659098, HAL.
    20. Giménez-Gómez, José-Manuel & Zergawu, Yitagesu-Zewdu, 2018. "The impact of social heterogeneity and commodity price shocks on civil conflicts," Journal of Policy Modeling, Elsevier, vol. 40(5), pages 959-997.

    More about this item

    Keywords

    Tax revenues; Growth; Instrumental variables;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:98:y:2012:i:2:p:220-227. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/devec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.