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The effects of taxation on income inequality in sub-Saharan Africa

Author

Listed:
  • Idrissa Ouedraogo
  • Issa Dianda
  • Pegdwende Patrik Ouedraogo
  • Rodrigue Tiraogo Ouedraogo
  • Bassirou Konfe

Abstract

This paper investigates the effects of taxation on income inequality in an unbalanced panel of 45 countries in sub-Saharan Africa over the period 1980-2018. We use instrumental-variable two-stage least squares and instrumental-variable quantile regression estimates. We find that taxation widens income inequality. We also show that the increasing effects of taxation on income inequality are higher in the most unequal countries than in the least unequal countries. Furthermore, we highlight an inverse U-shaped relationship between indirect taxes and income inequality.

Suggested Citation

  • Idrissa Ouedraogo & Issa Dianda & Pegdwende Patrik Ouedraogo & Rodrigue Tiraogo Ouedraogo & Bassirou Konfe, 2022. "The effects of taxation on income inequality in sub-Saharan Africa," WIDER Working Paper Series wp-2022-129, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2022-129
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    References listed on IDEAS

    as
    1. Jorge Martínez-Vázquez & Violeta Vulovic & Blanca Moreno Dodson, 2012. "The Impact of Tax and Expenditure Policies on Income Distribution: Evidence from a Large Panel of Countries," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 95-130, March.
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    3. Jorge Martinez-Vazquez & Violeta Vulovic & Yongzheng Liu, 2011. "Direct versus Indirect Taxation: Trends, Theory, and Economic Significance," Chapters, in: Emilio Albi & Jorge Martinez-Vazquez (ed.), The Elgar Guide to Tax Systems, chapter 2, Edward Elgar Publishing.
    4. Kaplan, David M. & Sun, Yixiao, 2017. "Smoothed Estimating Equations For Instrumental Variables Quantile Regression," Econometric Theory, Cambridge University Press, vol. 33(1), pages 105-157, February.
    5. Odusola, Ayodele, 2017. "Fiscal Space, Poverty and Inequality in Africa," UNDP Africa Economists Working Papers 268726, United Nations Development Programme (UNDP).
    6. Chenghong Xu & Mingming Han & Toyo Amegnonna Marcel Dossou & Festus Victor Bekun, 2021. "Trade openness, FDI, and income inequality: Evidence from sub‐Saharan Africa," African Development Review, African Development Bank, vol. 33(1), pages 193-203, March.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

    Income inequality; Taxation; Regression analysis; Sub-Saharan Africa;
    All these keywords.

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