Structural Tax Reforms and Public Spending Efficiency

Antonio Afonso, Joao Jalles and Ana Venâncio (avenancio@iseg.ulisboa.pt)

No 2020/0146, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

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

Keywords: government spending efficiency; tax reforms; data envelopment analysis; non-parametric estimation; panel data; political economy (search for similar items in EconPapers)
JEL-codes: C14 C23 H11 H21 H50 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-geo and nep-his
References: Add references at CitEc
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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