Assessing the Impact of Tax Policies on Economic Growth in Tunisia: New Empirical and Policy Analysis

Mkadmi, Jamel Eddine and Bakari, Sayef and Msai, Achwak (2021): Assessing the Impact of Tax Policies on Economic Growth in Tunisia: New Empirical and Policy Analysis.

Abstract

The present paper aims to investigate the impact of tax policy on economic growth in Tunisia over the period 1995 - 2020, by using cointegration analysis and Autoregressive Distributed Lag (ARDL). To explain tax policy, we use tax revenue and degree of fiscal freedom. Empirical results mark that in the long run tax revenue and degree of fiscal freedom has a positive impact on economic growth, while the impact of tax revenues is positive. Our findings provide evidence that tax policy is seen as a source of growth in Tunisia. From these results, we extract several basic policy conclusions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Tax Policy, Economic Growth, Tunisia, ARDL Model.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

References

Abdelhafidh, S & Bakari, S (2019). "Domestic Investment In The Agricultural Sector And Economic Growth In Tunisia," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 7(2), April.

Abdullahi Y Z, Sokoto A A and Safiyanu S S (2013). Analysis of the Relationship between Foreign Trade and Economic Growth in Africa. Economics and Finance Review. Vol. 3(03) pp. 01 – 10, May, 2013.

Alavinasab S M (2013). Foreign Trade and Economic Growth in Iran: An Empirical Study. International Journal of Academic Research in Business and Social Sciences. November 2013, Vol. 3, No. 11.

Amin, A & Chen, Y & Huang, S (2018). ‘Personal Income Tax and Economic Growth: A Comparative Study between China and Pakistan’. Asian Journal of Economic Modeling, 6(1):65-73.

Bakari, S (2016a). "Does Domestic Investment Produce Economic Growth in Canada: Empirical Analysis Based on Correlation, Cointegration and Causality," MPRA Paper 75966, University Library of Munich, Germany.

Bakari, S (2016c). "L’impact des Exportations Agricoles sur la Croissance Économique en Tunisie Durant la Période 1988 – 2014 [The Impact of Agricultural Exports on Economic Growth in Tunisia During the Period 1988 - ," MPRA Paper 80655, University Library of Munich, Germany.

Bakari, S (2016b). "Impact of Exports and Imports on Economic Growth in Canada: Empirical Analysis Based on Causality," MPRA Paper 75910, University Library of Munich, Germany.

Bakari, S (2017h). "Appraisal of Trade Potency on Economic Growth in Sudan: New Empirical and Policy Analysis," Asian Development Policy Review, Asian Economic and Social Society, vol. 5(4), pages 213-225, December.

Bakari, S (2017a). "The Impact Of Domestic Investment On Economic Growth: New Evidence From Malaysia," Journal of Smart Economic Growth, , vol. 2(2), pages 105-121, September.

Bakari, S (2017i). "The Impact of Vegetables Exports on Economic Growth in Tunisia," Economic Research Guardian, Weissberg Publishing, vol. 7(2), pages 72-87, December.

Bakari, S (2017d). "The Long Run and Short Run Impacts of Exports on Economic Growth: Evidence from Gabon," Economic Research Guardian, Weissberg Publishing, vol. 7(1), pages 40-57, June.

Bakari, S (2017b). "The Nexus between Export, Import, Domestic Investment and Economic Growth in Japan," MPRA Paper 76110, University Library of Munich, Germany.

Bakari, S (2017e). "The Relationship between Export, Import, Domestic Investment and Economic Growth in Egypt: Empirical Analysis," EuroEconomica, Danubius University of Galati, issue 2(36), pages 34-43, November.

Bakari, S (2017c). "The Three-Way Linkages Between Export, Import And Economic Growth: New Evidence From Tunisia," Journal of Smart Economic Growth, , vol. 2(3), pages 13-53, December.

Bakari, S (2017f). "Trade and Economic Growth in Germany," MPRA Paper 77404, University Library of Munich, Germany.

Bakari, S (2018a). "The Impact Of Citrus Exports On Economic Growth: Empirical Analysis From Tunisia," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 6(1), January.

Bakari, S (2018b). "Do Agricultural Raw Materials Imports Cause Agricultural Growth? Empirical Analysis from North Africa," Bulletin of Economic Theory and Analysis, BETA Journals, vol. 4(2), pages 65-77, December.

Bakari, S (2019). ‘If France Continues This Strategy, Taxes Will Destroy Domestic Investment And Economic Growth,’ Journal of Smart Economic Growth, vol. 4(1), pages 31- 45, Mars.

Bakari, S. (2020b). Comment encourager l'agriculture en Tunisie?: La question des déterminants de l'investissement agricole. Éditions universitaires européennes.

Bakari, S (2020a). “Domestic Investment and Economic Growth in Tunisia: Causality, Trends and Challenges”. Scholars' Press. 978-613-8-92729-7.

Bakari, S (2020c). ‘The Impact of Olive Oil Exports on Economic Growth: Empirical Analysis from Tunisia,’ BILTURK, The Journal of Economics and Related Studies, 2(3), 441- 458.

Bakari, S (2021b). "Are Domestic Investments in Spain a Source of Economic Growth?," MPRA Paper 105526, University Library of Munich, Germany.

Bakari, S (2021c). "Innovation and Economic Growth: Does Internet Matter?". BİLTÜRK Journal of Economics and Related Studies 3: 109-116

Bakari, S (2021a). "Reinvest the relationship between exports and economic growth in African countries: New insights from innovative econometric methods," MPRA Paper 108785, University Library of Munich, Germany.

Bakari, S (2021d). "The nexus between domestic investment and economic growth in G7 countries; Does internet matter?," MPRA Paper 108383, University Library of Munich, Germany.

Bakari, S & Abdelhafidh, S (2018). "Structure of Agricultural Investment and Economic Growth in Tunisia: An ARDL Cointegration Approach," Economic Research Guardian, Weissberg Publishing, vol. 8(2), pages 40-64, December.

Bakari, S & Ahmadi, A & Tiba, S (2020). ‘The Nexus among Domestic Investment, Taxation, and Economic Growth in Germany: Cointegration and Vector Error Correction Model Analysis,’ Journal of Smart Economic Growth, vol. 5(1), pages 37-47, May.

Bakari, S & Fakraoui, N & Mabrouki, M (2020a). "The Contribution of Domestic Investment, Exports and Imports on Economic Growth: A Case Study of Peru," MPRA Paper 99041, University Library of Munich, Germany.

Bakari, S & Fakraoui, N & Tiba, S (2019a). "Domestic Investment, Export, Import and Economic Growth in Brazil: An Application of Vector Error Correction Model," MPRA Paper 95528, University Library of Munich, Germany.

Bakari, S & Khalfallah, S & Zidi, A (2020b). "The Determinants of Agricultural Exports: Empirical Validation for the Case of Tunisia," MPRA Paper 100611, University Library of Munich, Germany.

Bakari, S., Khalfallah, S., & Zidi, A. (2020c). Comment promouvoir l'agriculture en Tunisie?: La question des déterminants des exportations agricoles. Éditions universitaires européennes.

Bakari, S., & Krit, M (2017). The nexus between exports, imports and economic growth: Evidence from Mauritania. International Journal of Economics and Business Research, 5(1), 10– 17. Retrieved from https://www.researchgate.net/publication/316511118

Bakari, S & Mabrouki, M (2016a). "La Relation entre la Croissance Economique, les Exportations et les Importations en Maroc : Une Validation Empirique Basée sur des Techniques de Modélisation VAR et de Causalité au Sens de Granger ," MPRA Paper 76440, University Library of Munich, Germany.

Bakari, S & Mabrouki, M (2016b). "The Relationship among Exports, Imports and Economic Growth in Turkey," MPRA Paper 76044, University Library of Munich, Germany.

Bakari, S & Mabrouki, M (2017a). "Impact Of Exports And Imports On Economic Growth: New Evidence From Panama," Journal of Smart Economic Growth, , vol. 2(1), pages 67-79, March.

Bakari, S & Mabrouki, M (2017b). "The Effect Of Agricultural Exports On Economic Growth In South-Eastern Europe: An Empirical Investigation Using Panel Data," Journal of Smart Economic Growth, , vol. 2(4), pages 49-64, December.

Bakari, S & Mabrouki, M (2018). "The Impact of Agricultural Trade on Economic Growth in North Africa: Econometric Analysis by Static Gravity Model," MPRA Paper 85116, University Library of Munich, Germany.

Bakari, S & Mabrouki, M & Elmakki, A (2018b). "The Impact of Domestic Investment in the Industrial Sector on Economic Growth with Partial Openness: Evidence from Tunisia," Economics Bulletin, AccessEcon, vol. 38(1), pages 111-128.

Bakari, S & Mabrouki, M & Elmakki, A (2018c). "The Nexus Between Industrial Exports And Economic Growth In Tunisia: Empirical Analysis," Journal of Smart Economic Growth, , vol. 3(2), pages 31-53, December.

Bakari, S & Mabrouki, M & Othmani, A (2018a). "The Six Linkages Between Foreign Direct Investment, Domestic Investment, Exports, Imports, Labor Force And Economic Growth: New Empirical And Policy Analysis From Nigeria," Journal of Smart Economic Growth, , vol. 3(1), pages 25-43, Juin.

Bakari, S & Saaidia, F (2017). "Assessment of Commerce Potency on Economic Growth in Italy: Empirical Analysis," MPRA Paper 76480, University Library of Munich, Germany.

Bakari, S & Saaidia, F & Soualhia, A (2019b). "Evaluation Of Trade Influence On Economic Growth In China: A Time Series Analysis," Journal of Smart Economic Growth, , vol. 4(3), pages 57-72, December.

Bakari, S & Tiba, S (2019c). ‘Long run and Short run Macroeconomics Determinants of Economic Growth in the USA: Cointegration and VECM Analysis,’ MPRA Paper 96618, University Library of Munich, Germany

Bakari, S & Tiba, S (2019a). "The Impact of Trade Openness, Foreign Direct Investment and Domestic Investment on Economic Growth: New Evidence from Asian Developing Countries," Economic Research Guardian, Weissberg Publishing, vol. 9(1), pages 46-54, June.

Bakari, S & Tiba, S (2019b). "Does Agricultural Trade promote Chinese economic growth? ARDL Approach," MPRA Paper 94614, University Library of Munich, Germany.

Bakari, S & Tiba, S, (2020a). "Does Agricultural Investment Still Promote Economic Growth in China? Empirical Evidence from ARDL Bounds Testing Model," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 8(4), October.

Bakari, S & Tiba, S (2020a). "The Impact of Internet on Economic Growth in North Africa: New empirical and policy analysis," MPRA Paper 100609, University Library of Munich, Germany.

Bakari, S & Tiba, S (2021). "The impact of Combustible Renewables and Waste on Economic Growth and Environmental Quality in Tunisia," MPRA Paper 108616, University Library of Munich, Germany.

Bakari, S & Tiba, S & Fakraoui, N (2019c). "Does Domestic Investment Contribute To Economic Growth In Uruguay? What Did The Empirical Facts Say?," Journal of Smart Economic Growth, , vol. 4(2), pages 53-69, September.

Bakari, S & Tiba, S & Mabrouki, M (2020d). "An Exploratory Study of the Causality between Internet Use, Innovation, and Economic Growth in Tunisia: An indispensable Case Analysis," MPRA Paper 100610, University Library of Munich, Germany.

Barro, R. J. (1991) Economic Growth in a Cross Section of Countries. Quarterly Journal of Economics. 106, 407–444.

Berasaluce J and Romero J (2017). Economic Growth and the External Sector: Evidence from Korea, Lessons for Mexico. Estudios Economicos, vol. 32 num. 1, pp; 95-131.

Bova, E., Kinda, T., Woo, J. et Zhang, S. (2013). Distributional Consequences of Fiscal Consolidation and the Role of Fiscal Policy : What Do the Data Say? Cahier de recherche, IMF.

Bouchoucha, N & Bakari, S (2019). "The Impacts of Domestic and Foreign Direct Investments on Economic Growth: Fresh Evidence from Tunisia," MPRA Paper 94816, University Library of Munich, Germany.

Brown RL, Durbin J, Evans JM. (1975). Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society, Series B 37: 149–192.

Chatterji M, Mohan S and Dastidar S G (2014). Relationship Between Trade Openness And Economic Growth Of India: A Time Series Analysis. Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 6(1 (March)), pages 45-69.

Dackehag, M., & Hansson, A. (2012). Taxation of income and economic growth: An empirical analysis of 25 rich OECD countries. Journal of Economic Development, 21(1), 93-118

Dasgupta, P. (2000). Population and Resources: An Exploration of Reproductive and Environmental Externalities. Population and Development Review, 26: 643–689.

Drèze, J. and Murthi, M. (2001). Fertility, Education, and Development: Evidence from India. Population and Development Review, 27: 33–63.

Fakraoui, N & Bakari, S (2019). "Tie Among Domestic Investment, Exports And Economic Growth: Empirical Analysis From India," Journal of Smart Economic Growth, , vol. 4(1), pages 1-15, Mars.

Fischer, S. (1993) The Role of Macroeconomic Factors in Growth. National Bureau of Economic Research. (Working Paper No. 4565).

Galor, O., Weil D. (2000). Population, technology and growth: from Malthus stagnation to the demographic transition and beyond, American Economic Review, 90, 806-828.

Gingo, H. U., & Demireli, E. (2018). Analysis of the effect of foreign direct investment on economic growth: The case of Ghana. International Journal of Contemporary Economics and Administrative Sciences, 7(34), 119-138.

Gurdal, T & Aydin, M & Inal, V (2020). ‘The relationship between tax revenue, government expenditure, and economic growth in G7 countries: new evidence from time and frequency domain approaches’. Economic Change and Restructuring. https://doi:10.1007/s10644-020-09280-x

Huang, T-H., Xie Z. (2013). Population and economic growth: a simultaneous equation perspective, Applied Economics, 45, 3820-3826.

Karras, G., & Furceri, D. (2009). Taxes and growth in Europe. South-Eastern Europe Journal of Economics , 2, 181-204.

Koch, S. F., Schoeman, N. J., & Tonder, J. J. (2005). Economic growth and the structure of taxes in South Africa: 1960-2002. South African Journal of Economics , 73, 190-210.

Li, H, Zhang, J. (2007). Do high birth rates hamper economic growth? Review of Economics and Statistics, 30, 67-80.

Lucas Jr., R. E. (1988) On the Mechanics of Economic Development. Journal of Monetary Economics 22, 3–42.

Maxime, A. T., & Toussaint, O. S (2019). Effets de la Politique Fiscale sur la Croissance Economique: Une Analyse sur Donnees de Panel Appliquee a Six Pays de L’Uemoa.European Scientific Journal October 2019 edition Vol.15, No.28 ISSN: 1857 – 7881

Mkadmi, J.E., Bakari, S., Othmani, A., (2021). "The Impact of Tax Revenues and Domestic Investments on Economic Growth in Tunisia," MPRA Paper 108387, University Library of Munich, Germany.

OCDE (2009). Chapitre 5. Fiscalité et croissance économique. Réformes économiques, Vol. 1, n°5, p.146-168.

Olubiyi E A (2014). Trade, Remittances and Economic Growth in Nigeria: Any Causal Relationship? African Development Review, Vol. 26, No. 2, 2014, 274–285.

Pesaran, M.H., Shin, Y., Smith, R.J., (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics 1, 289–326.

Raboloko, M (2019). Services sector and economic growth in Botswana. E3 Journal of Business Management and Economics Vol. 10(1). pp. 001-008 August, 2019.

Romer, P. M. (1986) Increasing Returns and Long-Run Growth. Journal of Political Economy. 94:5 (October), 1002–1037.

Stiglitz, E. J. (2016) L’Euro : Comment la monnaie unique menace l’avenir de l’Europe, Les liens qui libèrent.

Takumah, W & Iyke, B.N (2017). ‘The links between economic growth and tax revenue in Ghana: an empirical investigation’, International Journal of Sustainable Economy, 9(1), 34– 55.

Ulaşan B (2015). Trade Openness and Economic Growth: Panel Evidence, Applied Economics Letters. 22:2, 163-167, DOI: 10.1080/13504851.2014.931914.

Villieu, P. (2011). Quel objectif pour la dette publique à moyen terme? Revue d'économie financière/ les politiques de sortie de crise, n°103, p.79-98.

Worlu, C. N., & Nkoro, E. (2012). Tax revenue and economic development in Nigeria: A macroeconometric approach. Academic Journal of Interdisciplinary Studies , 48, 198-211.

Yao, W., Kinugasa, T., Hamori, S. (2013). An empirical analysis of the relationship between economic development and population growth in China, Applied Economics, 45, 4651-4661.