Africa's Growth Trap: A Political-Economy Model of Taxation, R&D and Investment

Margaret S. McMillan and William Masters

No 50A, CID Working Papers from Center for International Development at Harvard University

Abstract: 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 pro-growth policies to become sustainable, commitment mechanisms or new production techniques would be needed.

Keywords: time consistency; agricultural policy; economic growth (search for similar items in EconPapers)
JEL-codes: F43 O41 (search for similar items in EconPapers)
Date: 2000-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.hks.harvard.edu/sites/default/files/ce ... /2000-cid-wp-050.pdf (application/pdf)

Related works:
Working Paper: Africa's growth trap: a political-economy model of taxation, R&D and investment (2000)
Working Paper: Africa's Growth Trap: A Political-Economy Model of Taxation, R&D and Investment (2000)
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:cid:wpfacu:50a

Access Statistics for this paper

More papers in CID Working Papers from Center for International Development at Harvard University 79 John F. Kennedy Street. Contact information at EDIRC.
Bibliographic data for series maintained by Chuck McKenney ().