Taxation, infrastructure, and firm performance in developing countries

This paper investigates the relationship between taxation and firm performance in developing countries. Combining firm-level data from the World Bank Enterprise Surveys and tax data from the Government Revenue Dataset, our results suggest that taxation benefits firm growth in developing countries, e...

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Bibliographic Details
Published in:Public choice 2021-06, Vol.187 (3-4), p.455-480
Main Authors: Chauvet, Lisa, Ferry, Marin
Format: Article
Language:English
Subjects:
Accountability
Banking
Corruption
Developing countries
Economics
Economics and Finance
Humanities and Social Sciences
Infrastructure
LDCs
Organizational performance
Political Science
Public Finance
Public works
Tax revenues
Taxation
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Summary:This paper investigates the relationship between taxation and firm performance in developing countries. Combining firm-level data from the World Bank Enterprise Surveys and tax data from the Government Revenue Dataset, our results suggest that taxation benefits firm growth in developing countries, especially in lower-income countries. This positive contribution of domestic revenue to firm performance seems to channel through the financing of the public infrastructure vital to firms operating in these countries. We also provide evidence that this positive effect disappears when corruption is too pervasive, and when the source of tax revenue reduces government accountability.
ISSN:0048-5829
1573-7101
DOI:10.1007/s11127-020-00788-4