Africa’s growth trap: a political-economy model of taxation, R&D and investment
نویسندگان
چکیده
Why 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 progrowth policies to become sustainable, commitment mechanisms or new production techniques would be needed. JEL Classification Codes: F43, 041.
منابع مشابه
An African Growth Trap: Production Technology and the Time-Consistency of Agricultural Taxation, R&D and Investment
Why 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 d...
متن کاملEstimating Optimum Value of Investment and Human Capital in the R&D Sector of Iran Using an Augmented Endogenous Growth Model
This article intends to estimate the optimal value of investment and human capital in R&D sector of Iranian economy using an augmented endogenous growth model. To do so, two issues have been studied. First, an endogenous growth model has been extended to include investment in R&D as an independent variable. In the framework of this model, in order to determine the optimal value of investment an...
متن کاملUnderstanding the Political Economy of Agriculture in the Tropics
This paper offers a new explanation for why some governments consistently impose such high agricultural tax rates that their revenues decline, and consistently spend what tax revenue they have on things other than productive public investments such as agricultural R&D. We propose an intertemporal political economy model, in which taxes and R&D levels are set in a repeated game between governmen...
متن کاملAn Analysis the Effect of Capital Taxation on Allocation of Resources: A Dynamic Equilibrium Model Approach
Abstract T he return of capital is fundamental to the intertemporal allocation of resources by changing the consumption behavior and capital accumulation over time. Taxation on return of capital increases the marginal product of capital, meaning that capital stock is lower than when capital is not taxed, which results decreased growth and welfare in steady state. This pape...
متن کاملThe Welfare Effects of Switching from Consumption Taxation to Inflation Taxation in Iran’s Economy
The net effects of switching from consumption taxation to inflation taxation on resource allocation and welfare crucially depend on production externalities. With elastic labor supply, raising inflation taxation decreases leisure, but increases the levels of real consumption, capital, and output. Moreover, this tax switch has two opposing effects on the level of real money balances: A positive ...
متن کامل