Structural Tax Reforms and Public Spending Efficiency

Antonio Afonso, Joao Jalles and Ana Venâncio ()

No 51, EconPol Working Paper from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: We evaluate the effects of structural tax reforms on government spending efficiency in a sample of OECD economies over the period 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 PIT and VAT improve public sector efficiency; vi) in economic expansion periods, increasing CIT base and reducing PIT rates, positively affect public sector efficiency; ix) in recessions, efficiency improves when PIT and VAT bases increase and CIT rate increases.

Date: 2020
New Economics Papers: this item is included in nep-eec, nep-pbe and nep-pub
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Structural Tax Reforms and Public Spending Efficiency (2021)
Working Paper: Structural Tax Reforms and Public Spending Efficiency (2020)
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