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Structural Tax Reforms and Public Spending Efficiency

Author

Listed:
  • António Afonso
  • João Tovar Jalles
  • Ana Venâncio

Abstract

We evaluate the effects of structural tax reforms on government spending efficiency in a sample of OECD economies over theperiod 2007-2016. After calculating input spending efficiency scores,we assess the relevance for efficiency of narrative tax changes in a panel setup.We find that: i) input efficiency scores average around 0.6-07; ii) increases in the tax rates are reflected in falling public sector efficiency; iii) such negative effect is significant for PIT and VAT; iv) controlling for endogeneity, increases in tax rates are still associated with lower public sector efficiency, mainly in PIT; v) increasing tax bases for PITand VAT improve public sector efficiency; vi) in economic expansionperiods, increasing CIT baseand reducing PIT rates, positively affect public sector efficiency; ix) in recessions, efficiency improves when PIT and VAT bases increaseand CIT rate increases.

Suggested Citation

  • António Afonso & João Tovar Jalles & Ana Venâncio, 2020. "Structural Tax Reforms and Public Spending Efficiency," Working Papers REM 2020/0146, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp01462020
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    Citations

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    Cited by:

    1. António Afonso & Ana Patricia Montes & José M. Domínguez, 2024. "Measuring Tax Burden Efficiency in OECD Countries: An International Comparison," CESifo Working Paper Series 11333, CESifo.
    2. António Afonso & Gabriela Baquero Fraga, 2024. "Government spending efficiency in Latin America," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(1), pages 127-160, February.
    3. António Afonso & João Tovar Jalles & Ana Venâncio, 2023. "Government Spending and Tax Revenue Decentralization and Public Sector Efficiency: Do Natural Disasters Matter?," CESifo Working Paper Series 10424, CESifo.
    4. Lucas Menescal & José Alves, 2023. "Tax structure and public sector efficiency: new evidence for developing countries," Working Papers REM 2023/0291, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    5. Camelia Negri & Gheorghița Dincă, 2023. "Public sector’s efficiency as a reflection of governance quality, an European Union study," PLOS ONE, Public Library of Science, vol. 18(9), pages 1-23, September.
    6. Ablam Estel Apeti & Kwamivi Mawuli Gomado, 2025. "International monetary fund conditionality and structural reforms: Evidence from developing countries," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 33(2), pages 439-486, April.
    7. Chrysanthakopoulos, Christos & Bouloumpasis, Panagiotis & Skotoris, Manolis & Tagkalakis, Athanasios, 2025. "The macroeconomic effects of public sector efficiency in advanced economies," International Economics, Elsevier, vol. 182(C).
    8. António Afonso & João Tovar Jalles & Ana Venâncio, 2024. "A tale of government spending efficiency and trust in the state," Public Choice, Springer, vol. 200(1), pages 89-118, July.
    9. Roosemarina Anggraini Rambe & Purmini Purmini & Armelly Armelly & Lizar Alfansi & Ratu Eva Febriani, 2022. "Efficiency Comparison of Pro-Growth Poverty Reduction Spending before and during the COVID-19 Pandemic: A Study of Regional Governments in Indonesia," Economies, MDPI, vol. 10(6), pages 1-14, June.
    10. Afonso, António & Tovar Jalles, João & Venâncio, Ana, 2024. "Fiscal decentralization and public sector efficiency: Do natural disasters matter?," Economic Modelling, Elsevier, vol. 137(C).
    11. Tamisai Chipunza & Senia Nhamo, 2023. "Fiscal capacity and public health expenditure in Zimbabwe," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2175459-217, December.
    12. Brahim Abidar & Slimane Ed-Dafali & Miloudi Kobiyh, 2025. "Determinants of Value-Added Tax Revenue Transfers in Municipalities of Emerging Economies," Economies, MDPI, vol. 13(5), pages 1-27, April.
    13. López-Herrera, Carmen & Cordero, José M. & Pedraja-Chaparro, Francisco & Polo, Cristina, 2023. "Fiscal rules and their influence on public sector efficiency," MPRA Paper 119018, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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