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Title:Institutional quality and government efficiency PDF Logo
Authors:Chong, Alberto
Gradstein, Mark
Issue Date:2007
Series/Report no.:Working paper // Inter-American Development Bank, Research Department 606
Abstract:Poorer countries have a much smaller public sector and correspondingly a smaller tax burden than richer countries, yet, their economic performance has not been necessarily better. Using a simple model, this paper suggests that the growth and welfare effects of taxation are mediated through institutional quality; consequently, optimal tax levels increase with improved institutional quality. The paper then employs firm-level perceptions on the quality of public services and on the tax burden to test some of the model's predictions. Consistent with these predictions, the paper finds that a higher level of institutional quality bolsters positive perceptions of the quality of public services while at the same time moderating the view of taxes as an obstacle to growth.
Quality of Public Services
Document Type:Working Paper
Appears in Collections:Research Department Working Papers, Inter-American Development Bank

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