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Systematic Review Of Evidence On The Impact Of Tax Incentives In Latin American And Caribbean Countries

Author

Listed:
  • Glenn P. Jenkins

    (Department of Economics Queen’s University, Canada, and Cambridge Resource International Inc.)

  • Abdallah Othman

    (Cambridge Resources International Inc.)

  • Edna Armendariz

    (Inter-American Development Bank (IDB))

  • Anastasiya Yarygina

    (Inter-American Development Bank (IDB))

Abstract

This report provides a systematic review of the impact of tax incentives on investment and economic growth in Latin American and Caribbean (LAC) countries. While tax incentives are widely used to attract foreign direct investment (FDI), stimulate employment, and promote sectoral development, empirical evidence on their effectiveness remains mixed. The analysis reveals that although some incentives have successfully increased investment in targeted sectors, many fail to deliver significant economic benefits, often leading to substantial revenue losses. A critical gap in this report is the lack of comprehensive ex-ante evaluations, with most studies focusing on ex-post assessments. Cost-benefit analyses indicate that broad-based tax incentives are less efficient than targeted schemes, particularly in research and development (R&D) and export-oriented industries. The findings highlight the need for improved evaluation frameworks, better governance, and more strategic tax incentive policies to ensure sustainable economic growth.

Suggested Citation

  • Glenn P. Jenkins & Abdallah Othman & Edna Armendariz & Anastasiya Yarygina, 2025. "Systematic Review Of Evidence On The Impact Of Tax Incentives In Latin American And Caribbean Countries," Development Discussion Papers 2025-05, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:4630
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate Income Tax; Cost-Benefit Analysis (CBA); Economic Growth; Investment Policy; Fiscal Policy; Public Finance; Foreign Direct Investment (FDI); Latin America and the Caribbean (LAC); Special Economic Zones (SEZs); Tax Incentives;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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