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Decentralized Tax Revenue, Institutional Complementarity and Economic Growth: A Time Series Analysis of Pakistan

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  • Muhammad Shahid

    (Ph.D Scholar, National College of Business Administration and Economics, Lahore, Pakistan,)

  • Rukhsana Kalim

    (University of Management and Technology, Lahore, Pakistan.)

Abstract

Fiscal decentralization is one of the major policy variables to attain economic efficiency. The present study examines the impact of decentralized taxes on the economic growth of Pakistan from 1976 to 2018. For examining the stationarity of variables, Kwiatkowski-Phillips-Schmidt-Shin (KPSS) and Ng-Perron unit root Tests are used. Autoregressive Distributed Lag Approach (ARDL) is used for co-integration among the variables of the model. The results suggest that decentralized tax revenue i.e. income tax decentralization and sales tax revenue with political institutions have growth promoting impact on the economy of Pakistan. With strong institutions, provincial governments can give better results while transferring responsibility of collecting income tax from federal to provincial level.

Suggested Citation

  • Muhammad Shahid & Rukhsana Kalim, 2020. "Decentralized Tax Revenue, Institutional Complementarity and Economic Growth: A Time Series Analysis of Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(4), pages 25-33.
    • Handle: RePEc:eco:journ1:2020-04-4
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    More about this item

    Keywords

    Stationarity; Income tax and sales tax; decentralization; political institutions; economic growth.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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