The Effects of the Value-Added Tax on Revenue and Inequality

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Alavuotunki , K , Haapanen , M & Pirttilä , J O 2019 , ' The Effects of the Value-Added Tax on Revenue and Inequality ' , Journal of Development Studies , vol. 55 , no. 4 , pp. 490-508 . https://doi.org/10.1080/00220388.2017.1400015

Title: The Effects of the Value-Added Tax on Revenue and Inequality
Author: Alavuotunki, Kaisa; Haapanen, Mika; Pirttilä, Jukka Olavi
Contributor: University of Helsinki, Economics
Date: 2019-04-03
Language: eng
Number of pages: 19
Belongs to series: Journal of Development Studies
ISSN: 0022-0388
URI: http://hdl.handle.net/10138/301554
Abstract: This paper examines the impact of the introduction of the value-added tax on inequality and government revenues using newly released macro data. We present both conventional country fixed effect regressions and instrumental variable analyses, where VAT adoption is instrumented using the previous values of neighbouring countries’ VAT systems as an instrument. The results reveal – in contrast to earlier work – that the revenue consequences of the VAT have not been positive. The results indicate that income-based inequality has increased due to the VAT adoption, whereas consumption inequality has remained unaffected.
Subject: 511 Economics
income inequality
globalization
panel
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