Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/51529
Authors: 
Chong, Alberto
Gradstein, Mark
Year of Publication: 
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.
Subjects: 
Institutions
Taxes
Quality of Public Services
JEL: 
H20
H41
O10
O17
Document Type: 
Working Paper

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