Puzzling tax structures in developing countries
Subtitle: a comparison of two alternative explanations
By: Roger Gordon, Wei Li.
Contributors: Li, Wei, 1964-; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11661; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11661.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Taxation -- Developing countries -- Econometric models.
Description: "Observed economic policies in developing countries differ sharply both from those observed among developed countries and from those forecast by existing models of optimal policies.  For example, developing countries rely little on broad-based taxes, and make substantial use of tariffs and seignorage as nontax sources of revenue.The objective of this paper is to contrast the implications of two models designed to explain such anomalous policies.  One approach, by Gordon-Li (2005), focuses on the greater difficulties faced in poor countries in monitoring taxable activity, and explores the best available policies given such difficulties.  The other, building on Grossman-Helpman (1994), presumes that political-economy problems in developing countries are worse, leading to worse policy choices.  The paper compares the contrasting theoretical implications of the two models with the data, and finds that the political-economy approach does poorly in reconciling many aspects of the data with the theory.  In contrast, the forecasts from Gordon-Li model are largely consistent with the data currently available"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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