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Taxation, infrastructure, and firm performance in developing countries

Author

Listed:
  • Lisa Chauvet

    (IRD, Université Paris-Dauphine, PSL University, LEDa, DIAL)

  • Marin Ferry

    (IRD, Université Paris-Dauphine, PSL University, LEDa, DIAL
    ERUDITE (EA 437), Université Gustave Eiffel, UPEC)

Abstract

This paper investigates the relationship between taxation and firm performance in developing countries. Combining firm-level data from the World Bank Enterprise Surveys and tax data from the Government Revenue Dataset, our results suggest that taxation benefits firm growth in developing countries, especially in lower-income countries. This positive contribution of domestic revenue to firm performance seems to channel through the financing of the public infrastructure vital to firms operating in these countries. We also provide evidence that this positive effect disappears when corruption is too pervasive, and when the source of tax revenue reduces government accountability.

Suggested Citation

  • Lisa Chauvet & Marin Ferry, 2021. "Taxation, infrastructure, and firm performance in developing countries," Public Choice, Springer, vol. 187(3), pages 455-480, June.
    • Handle: RePEc:kap:pubcho:v:187:y:2021:i:3:d:10.1007_s11127-020-00788-4
    DOI: 10.1007/s11127-020-00788-4
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    More about this item

    Keywords

    Taxation; Firm growth; Infrastructure; Corruption;
    All these keywords.

    JEL classification:

    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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