EconPapers    
Economics at your fingertips  
 

Optimal taxation and growth with public goods and costly enforcement

Pierre-Richard Agénor and Kyriakos Neanidis

The Journal of International Trade & Economic Development, 2014, vol. 23, issue 4, 425-454

Abstract: This paper studies optimal direct and indirect taxation in an endogenous growth framework with a productive public good and costly tax collection. Optimal (growth-maximizing) tax rules are derived under exogenous collection costs. The optimal direct-indirect tax ratio is shown to be negatively related to the administrative costs of collecting these taxes, as documented in cross-country data. This result also holds under endogenous collection costs (with these costs inversely related to administrative spending on tax enforcement), but for these to generate significant effects on tax collection requires implausibly high degrees of efficiency in spending, or the allocation of a large fraction of resources to tax enforcement. Depending on how it is financed, the latter policy may entail adverse effects on growth. Improving 'tax culture' and the sense of civic duty through greater budgetary transparency may be a more effective policy to improve tax collection and promote economic growth.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/09638199.2012.730055 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Optimal Taxation and Growth with Public Goods and Costly Enforcement (2007) Downloads
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:taf:jitecd:v:23:y:2014:i:4:p:425-454

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RJTE20

DOI: 10.1080/09638199.2012.730055

Access Statistics for this article

The Journal of International Trade & Economic Development is currently edited by Pasquale Sgro, David E.A. Giles and Charles van Marrewijk

More articles in The Journal of International Trade & Economic Development from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2024-07-04
Handle: RePEc:taf:jitecd:v:23:y:2014:i:4:p:425-454