Estimating tax effort: new evidence from a novel dataset

Tatul Hayruni, Gevorg Minasyan and Armen Nurbekyan
Additional contact information
Armen Nurbekyan: Economic Research Department, CBA, Yerevan, Armenia

Baltic Journal of Economics, 2025, vol. 25, issue 1, 131-155

Abstract: We provide new evidence on countries’ tax effort – the gap between collected and predicted tax revenue – based on a self-constructed panel of 114 countries, covering the period from 1995 to 2020. We apply the stochastic frontier model of Kumbhakar et al. (2014. Technical efficiency in competing panel data models: A study of Norwegian grain farming. Journal of Productivity Analysis, 41(2), 321–337.) to disentangle country-specific fixed effects from the persistent and time-varying components of tax effort. Our findings suggest that the level of development, trade volume, education, income inequality, and the ease of tax collection are important determinants of tax collection. We also find that countries with historically strong indicators of governance, rule of law, and control of corruption tend to exhibit higher levels of persistent effort. This suggests improved estimates of tax effort by 7.2–12.5 percentage points compared to specifications, where persistent trends in tax effort are attributed either to country heterogeneity or time-varying factors.

Keywords: Stochastic frontier; tax capacity; tax effort; tax rate dataset (search for similar items in EconPapers)
JEL-codes: C23 G40 H21 H22 H26 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.tandfonline.com/doi/epdf/10.1080/1406099X.2025.2491214 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:25:y:2025:i:1:p:131-155

Access Statistics for this article

More articles in Baltic Journal of Economics from Baltic International Centre for Economic Policy Studies Contact information at EDIRC.
Bibliographic data for series maintained by Anna Zasova ().