Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273918 
Year of Publication: 
2022
Series/Report no.: 
WIDER Working Paper No. 2022/129
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
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 instrumentalvariable 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. Governments in sub-Saharan Africa should increase indirect taxes to at least 28.36 per cent of gross domestic product in order to reap the dividends in terms of reducing inequality.
Subjects: 
income inequality
taxation
quantile regression
sub-Saharan Africa
JEL: 
C26
D31
D63
H23
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-262-1
Document Type: 
Working Paper

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