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- Title
DOES A VALUE‐ADDED TAX INCREASE ECONOMIC EFFICIENCY?
- Authors
Adhikari, Bibek
- Abstract
Theory predicts that a value‐added tax (VAT) is an efficient tax system, which is one of the primary reasons for its rapid adoption worldwide. However, there is little empirical evidence supporting this prediction, especially for developing countries. I estimate the efficiency gains of introducing a VAT using the synthetic control method. I find that a VAT has, on average, positive and economically meaningful impact on economic efficiency. This result, however, is driven by richer countries only. There is no significant impact of the VAT on poorer countries. The findings are robust across a series of placebo studies and sensitivity checks.
- Subjects
VALUE-added tax; ECONOMIC efficiency; EMPIRICAL research; GROSS domestic product; LIABILITIES (Accounting) -- Taxation
- Publication
Economic Inquiry, 2020, Vol 58, Issue 1, p496
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/ecin.12847