Using Surveys of Business Perceptions as a Guide to Growth-Enhancing Fiscal Reforms

44 Pages Posted: 15 Mar 2013

See all articles by Florian Misch

Florian Misch

ZEW – Leibniz Centre for European Economic Research

Norman Gemmell

Victoria University of Wellington - Victoria Business School

Richard Kneller

University of Nottingham

Multiple version iconThere are 3 versions of this paper

Date Written: 2013

Abstract

This paper assesses the merits of using surveys of business perceptions of growth constraints as a guide to growth-enhancing …fiscal policy reforms. Using endogenous growth models in which the government levies an income tax to provide public inputs to the production of private …firms, the paper demonstrates that business perceptions of growth constraints are subject to systematic biases except when fi…rms compare different types of public services or different types of public capital. In particular …firms can be expected to systematically over-estimate the growth-enhancing effects of lower tax rates, and under-estimate the growth-enhancing effects of greater provision of public capital. It is then shown that these theoretical predictions regarding how …firms rank constraints correspond closely to the observed ranking of constraints by fi…rms in the World Bank’s Enterprise Surveys.

Keywords: Economic Growth, Fiscal Policy, Imperfectly Informed Governments, Business Perceptions, Diagnostics, Subjective Data

JEL Classification: D20, E62, O12

Suggested Citation

Misch, Florian and Gemmell, Norman and Kneller, Richard, Using Surveys of Business Perceptions as a Guide to Growth-Enhancing Fiscal Reforms (2013). ZEW - Centre for European Economic Research Discussion Paper No. 13-012. Available at SSRN: https://ssrn.com/abstract=2233399 or http://dx.doi.org/10.2139/ssrn.2233399

Florian Misch (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Norman Gemmell

Victoria University of Wellington - Victoria Business School ( email )

PO Box 600
Wellington 6140
New Zealand

Richard Kneller

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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