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Growth and volatility of tax revenues in Latin America

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  • Fricke, Hans
  • Süssmuth, Bernd

Abstract

Against the backdrop of high macroeconomic instability and the need to meet the demands of public spending, we analyze the trade-off between growth and volatility of tax revenues in Latin America. Short-run and long-run elasticities for a sample of eleven economies are estimated accounting for state-dependent asymmetric reactions. Controlling for composition of revenue sources and other idiosyncrasies, we find revenues above (below) its long-run equilibrium to react stronger (weaker) to business cycle dynamics. Our detailed elasticity estimates can give some orientation on how to stably reach higher tax levels on the way to develop an adequate internal tax system.

Suggested Citation

  • Fricke, Hans & Süssmuth, Bernd, 2013. "Growth and volatility of tax revenues in Latin America," Working Papers 124, University of Leipzig, Faculty of Economics and Management Science.
    • Handle: RePEc:zbw:leiwps:124
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    2. Bruno Martorano, 2018. "Taxation and Inequality in Developing Countries: Lessons from the Recent Experience of Latin America," Journal of International Development, John Wiley & Sons, Ltd., vol. 30(2), pages 256-273, March.
    3. Koester, Gerrit B. & Priesmeier, Christoph, 2012. "Estimating dynamic tax revenue elasticities for Germany," Discussion Papers 23/2012, Deutsche Bundesbank.
    4. Bruno Martorano, 2018. "Taxation and Inequality in Developing Countries: Lessons from the Recent Experience of Latin America," Journal of International Development, John Wiley & Sons, Ltd., vol. 30(2), pages 256-273, March.
    5. Wasi Ul Islam & Hafiz Muhammad Abubakar Siddique, 2017. "Determinants of Low Tax Revenue: A panel Data Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 6(1), pages 28-34, March.
    6. Koester, Gerrit & Priesmeier, Christoph, 2017. "Revenue elasticities in euro area countries," Working Paper Series 1989, European Central Bank.
    7. Giraldo, Carlos & Giraldo, Iader & Huertas, Cristian & Sánchez, Juan Camilo, 2024. "Determinants of Financial Hedging Strategies among Commodity Producer Firms in Latin America," Documentos de trabajo 21196, FLAR.
    8. Tomas Havranek & Zuzana Irsova & Jiri Schwarz, 2016. "Dynamic elasticities of tax revenue: evidence from the Czech Republic," Applied Economics, Taylor & Francis Journals, vol. 48(60), pages 5866-5881, December.
    9. repec:prg:jnlcfu:v:2021:y:2021:i:4:id:567 is not listed on IDEAS
    10. Marina Malkina, 2017. "Influence of the Industrial Structure of Economy on the Risk Level of Russian Regions' Tax Systems," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 65(6), pages 2025-2035.
    11. Limberg, Julian, 2022. "Building a tax state in the 21st century: Fiscal pressure, political regimes, and consumption taxation," World Development, Elsevier, vol. 154(C).
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    13. Le, Tuan Minh & Moreno-Dodson, Blanca & Bayraktar, Nihal, 2012. "Tax capacity and tax effort : extended cross-country analysis from 1994 to 2009," Policy Research Working Paper Series 6252, The World Bank.
    14. Joshua Aizenman & Yothin Jinjarak & Jungsuk Kim & Donghyun Park, 2015. "Tax Revenue Trends in Asia and Latin America: A Comparative Analysis," NBER Working Papers 21755, National Bureau of Economic Research, Inc.
    15. Apeti, Ablam Estel & Edoh, Eyah Denise, 2023. "Tax revenue and mobile money in developing countries," Journal of Development Economics, Elsevier, vol. 161(C).
    16. Manjón Álvarez, Adrián M., 2018. "Elasticidades tributarias dinámicas: evidencias a corto plazo y largo plazo en Bolivia (1990-2018)," Revista Latinoamericana de Desarrollo Economico, Carrera de Economía de la Universidad Católica Boliviana (UCB) "San Pablo", issue 31, pages 100-134, May.
    17. OGNERU, Victor, 2019. "Analysis Of The Relationship Between Tax Revenue And Gross Value Added In The Romanian Economy," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 23(2), pages 37-55, June.
    18. Wenéyam Hippolyte Balima & Jean‐Louis Combes & Alexandru Minea, 2016. "Bond Markets Initiation and Tax Revenue Mobilization in Developing Countries," Southern Economic Journal, John Wiley & Sons, vol. 83(2), pages 550-572, October.
    19. Francis Kwaw Andoh & Nehemiah E. Osoro & Eliab Luvanda, 2019. "Growth Dynamics of Value-Added Tax Revenue in Ghana," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(2), June.
    20. Lagravinese, Raffaele & Liberati, Paolo & Sacchi, Agnese, 2020. "Tax buoyancy in OECD countries: New empirical evidence," Journal of Macroeconomics, Elsevier, vol. 63(C).
    21. Weneyam Hippolyte Balima & Jean-Louis Combes & Alexandru Minea, 2016. "Bond Markets Initiation and Tax Revenue Mobilization in Developing Countries," Southern Economic Journal, Southern Economic Association, vol. 83(2), pages 550-572, October.
    22. Raffaele Lagravinese & Paolo Liberati & Agnese Sacchi, 2016. "The growth and variability of local taxes: An application to the Italian regions," Working Papers. Collection B: Regional and sectoral economics 1601, Universidade de Vigo, GEN - Governance and Economics research Network.
    23. Marina Malkina & Rodion Balakin, 2020. "Risks of Regional Tax Systems and Their Portfolio Decomposition: The Case of Modern Russia," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 68(6), pages 995-1009.
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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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