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Taxation, infrastructure, and firm performance in developing countries

Author

Listed:
  • Lisa Chauvet

    (UP1 - Université Paris 1 Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Marin Ferry

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel)

Abstract

This paper investigates the relationship between taxation and firm performance in developing countries. Combining firm-level data from the World Bank Enterprise Surveys and tax data from the Government Revenue Dataset, our results suggest that taxation benefits firm growth in developing countries, especially in lower-income countries. This positive contribution of domestic revenue to firm performance seems to channel through the financing of the public infrastructure vital to firms operating in these countries. We also provide evidence that this positive effect disappears when corruption is too pervasive, and when the source of tax revenue reduces government accountability.

Suggested Citation

  • Lisa Chauvet & Marin Ferry, 2021. "Taxation, infrastructure, and firm performance in developing countries," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-03231532, HAL.
    • Handle: RePEc:hal:cesptp:halshs-03231532
    DOI: 10.1007/s11127-020-00788-4
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    Cited by:

    1. Pascale Combes Motel & Jean-Louis Combes & Bao-We-Wal Bambe & Chantale Riziki Oweggi, 2023. "Does Climate Change Affect Firms’ Innovative Capacity in Developing Countries ?," Working Papers hal-04341934, HAL.
    2. Ablam Estel Apeti & Jean-Louis Combes & Eyah Denise Edoh, 2023. "Entrepreneurship in developing countries: can mobile money play a role?," Working Papers hal-04081304, HAL.
    3. Luc Jacolin & Quentin Dufresne & Marin Ferry, 2025. "From Debt Reset to Growth Onset? Sovereign Debt Restructuring and Firm Performance in Developing Countries," Working papers 991, Banque de France.
    4. Apeti, Ablam Estel & Ly, Alpha, 2024. "Power constraints and firm-level total factor productivity in developing countries," Energy, Elsevier, vol. 309(C).
    5. Iva Hasikova & Jan Hanousek, 2025. "VAT (non)compliance in the EU: Damaging corruption and shadow economy spillovers vs. government effectiveness and efficiency," MENDELU Working Papers in Business and Economics 2025-100, Mendel University in Brno, Faculty of Business and Economics.
    6. Bambe, Bao-We-Wal & Ouedraogo, Adama, 2025. "Public expenditure efficiency and foreign direct investment in developing countries," IDOS Discussion Papers 16/2025, German Institute of Development and Sustainability (IDOS).
    7. Sawadogo, Rayangnewendé Frans, 2024. "Do fiscal rules shape private-sector investment decisions?," Journal of Macroeconomics, Elsevier, vol. 81(C).
    8. Pafadnam, Neerbewendé Abdoul Rachid, 2024. "How does implementing the Extractive Industries Transparency Initiative (EITI) affect economic growth? Evidence from developing countries," European Journal of Political Economy, Elsevier, vol. 85(C).
    9. Ablam Estel Apeti & Bao-We-Wal Bambe & Aguima Aime Bernard Lompo, 2023. "Determinants of public sector efficiency: a panel database from a stochastic frontier analysis," Post-Print hal-04189811, HAL.
    10. Neerbewendé Abdoul Rachid Pafadnam, 2024. "How does implementing the Extractive Industries Transparency Initiative (EITI) affect economic growth? Evidence from developing countries," Post-Print hal-04727043, HAL.

    More about this item

    Keywords

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    JEL classification:

    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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