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Using surveys of business perceptions as a guide to growth-enhancing fiscal reforms

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  • Florian Misch
  • Norman Gemmell
  • Richard Kneller

Abstract

type="main" xml:id="ecot12049-abs-0001" xml:lang="en"> This paper assesses the merits of using business perceptions of growth constraints as a guide to growth-enhancing fiscal policy reforms. Using endogenous growth models in which the government levies an income tax to provide public inputs to the production of private firms, the paper demonstrates that such perceptions of growth constraints may be misleading from a policy perspective. In particular, firms can be expected to systematically overestimate the growth-enhancing effects of lower tax rates relative to public services and public capital, and underestimate the growth-enhancing effects of greater provision of public capital relative to taxation and public services. In addition, we show that firms rank different public services and different types of public capital according to the actual costs they impose on firms. It is then shown that these theoretical predictions regarding how firms rank constraints correspond closely to the observed ranking of constraints by firms in the World Bank's Enterprise Surveys.

Suggested Citation

  • Florian Misch & Norman Gemmell & Richard Kneller, 2014. "Using surveys of business perceptions as a guide to growth-enhancing fiscal reforms," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 22(4), pages 683-725, October.
    • Handle: RePEc:bla:etrans:v:22:y:2014:i:4:p:683-725
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    1. Florian Misch & Norman Gemmell & Richard Kneller, 2013. "Growth and Welfare Maximization in Models of Public Finance and Endogenous Growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(6), pages 939-967, December.
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    Cited by:

    1. Klaus Friesenbichler & Oliver Fritz & Werner Hölzl & Gerhard Streicher & Florian Misch & Mustafa Yeter, 2014. "The Efficiency of EU Public Administration in Helping Firms Grow," WIFO Studies, WIFO, number 50931.
    2. Era Dabla-Norris & Mark Gradstein & Fedor Miryugin & Florian Misch, 2019. "Productivity and Tax Evasion," CESifo Working Paper Series 8002, CESifo.
    3. Friesenbichler, Klaus & Fritz, Oliver & Hölzl, Werner & Misch, Florian & Streicher, Gerhard & Yeter, Mustafa, 2014. "The efficiency of EU public administration in helping firms grow: Final report," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 111450.

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    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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