Quasi‐Experimental Analysis on the Effects of Adoption of a Value Added Tax

16 Pages Posted: 23 Aug 2014

See all articles by Alex Ufier

Alex Ufier

FDIC Center for Financial Research

Date Written: October 2014

Abstract

Value added taxes (VATs) have become an important source of government funding in past decades, but little empirical work has been carried out on their macroeconomic impacts. As the decision to implement a VAT is endogenous, regression methods analyzing the impact of the policy choice will yield biased estimates. To solve this problem, I first model the VAT adoption decision for 192 countries using survival analysis. I then match adopters to non‐adopters using propensity score matching. I find that VAT adoption is associated with an increase in growth and investment as well as lower inflation and government spending as a share of GDP.

JEL Classification: H20, H21

Suggested Citation

Ufier, Alexander, Quasi‐Experimental Analysis on the Effects of Adoption of a Value Added Tax (October 2014). Economic Inquiry, Vol. 52, Issue 4, pp. 1364-1379, 2014. Available at SSRN: https://ssrn.com/abstract=2485637 or http://dx.doi.org/10.1111/ecin.12099

Alexander Ufier (Contact Author)

FDIC Center for Financial Research ( email )

550 Seventeenth Street, NW
Washington, DC 20057
United States
6104703539 (Phone)

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