The Impact of Revenue Gap on Economic Growth: A Case Study of Pakistan
This study employs auto-regressive distributed lag (ARDL) bounds approach to cointegration for long run and errorcorrection modeling (ECM) for short run analysis to examine the relationship between revenue gap and economic growth for Pakistan using annual time series data over the period 1980 to 2008. The short and long run results indicate that revenue gap is statistical significant and negatively effect economic growth. The significant and negative coefficient of error correction term in ECM indicates that after a shock, the long rum equilibrium will again converge towards equilibrium about 10.406 percent within a year.
[1] K. Marsden, "Links between taxes and economic growth," World Bank
Staff Working Paper Number 605, 1983, The World Bank, Washington,
D.C.
[2] S. J. Kim, "Growth effect of taxes in an endogenous growth model: to
what extent do taxes affect economic growth?," Journal of Economic
Dynamics and Control, Vol. 23, pp. 125-158, 1997.
[3] R. E. Lucas, "Supply-side economics: an analytical review," Oxford
Economic Papers, Vol. 42, pp. 293-316, 1990.
[4] L. E. Jones and R.E. Manuelli, "A convex model of equilibrium
growth," Journal of Political Economy, Vol. 98. pp. 1008-1038, 1990.
[5] S. T. Rebelo, "Long run policy analysis and long run growth," Journal
of Political Economy, Vol. 99, pp. 500-521, 1991.
[6] R. G. King and S. T. Rebelo, "Public policy and economic growth:
developing neoclassical implications," Journal of Political Economy,
Vol. 98. pp. 126-149, 1990.
[7] C. Yuen, "Taxation, human capital accumulation, and economic
growth," PhD. dissertation, University of Chicago, Chicago, 1991.
[8] F. Schneider and B. Frey, "Informal and underground economy,"
Economics in Ashenfelter, Orley. International Encyclopedia of Social
and Behavioral Science Vol. 12, Elsevier Science Publishing Company,
Amsterdam, 2001.
[9] R.J. Chelliah, "Trends in Taxation in Developing Countries," IMF Staff
Papers, Vol. 18, No. 2, pp. 254-325, July 1971.
[10] B. Yasmin and H. Rauf, "Measuring the underground economy and its
impact on the economy of Pakistan," The Lahore Journal of Economics,
Vol. 9(2). Pp. 93-103, 2003.
[11] Pakistan Economic Survey (various issues), Ministry of Finance,
Islamabad, Pakistan.
[12] D. J. Pyle, "Tax Evasion and the Black Economy," The Macmillan Press
Ltd, 1989.
[13] P. Wang and C. K. Yip, "Taxation and Economic Growth: The Case of
Taiwan," American Journal of Economics and Sociology, Vol. 51(3), pp.
317-331, 1992.
[14] R. Burgess. and N. Stern, "Taxation and Development," Journal of
Economic Literature, Vol.. 31 (2), pp. 762-830, 1993.
[15] S. Robinson, A. Y├║nez-Naude, R. Hinojosa-Ojeda, J.D. Lewis and S.
Devarajan, "From Stylized to Applied Models: Building Multisector
CGE Models for Policy Analysis," North American Journal of
Economics and Finance, Vol. 10, pp. 5-38, 1999.
[16] A. P. Maingot and D. Mitchell, "Taxing Free Riders," Foreign Policy,
Vol. 132, pp 6-8, 2002.
[17] K. Beckmann, "Tax Progression and Evasion: a Simple Graphical
Approach," Andrássy Working Paper Series No. III, Universidad
Budapest, Hungary, 2003.
[18] M. A. Kemal, "Underground Economy and Tax Evasion in Pakistan: A
Critical Evaluation," Research Report No.184, Pakistan Institute of
Development Economics. Islamabad, 2003.
[19] A. Sandmo, "The theory of tax evasion: A retrospective view,"
Discussion paper 31/04, Norwegian School of Economics and Business
Administration, Norway, 2004.
[20] J. V. Martinez, "Pakistan: A Preliminary Assessment of the Federal Tax
System," International Studies Program Working Paper Series, Andrew
Young School of Policy Studies, Georgia State University, USA, 2006.
[21] Statistical Bulletin of Pakistan (various issues), State Bank of Pakistan,
Pakistan
[22] Statistical Year Book of Pakistan (various issues), Federal Bureau of
Statistics, Islamabad, Pakistan.
[23] G. S. Maddala and In-Moo Kim, "Unit Roots, Cointegration, and
Structural Change," Cambridge, Cambridge University Press, 2003.
[24] P. Perron, "The Great Crash, the Oil Price Shock, and the Unit Root
Hypothesis," Econometrica, Vol. 57(6), pp. 1361-1401, 1989.
[25] C. R. Nelson and C. R. Plosser, "Trends and random walks in
macroeconomic time series: Some evidence and implications," Journal
of Monetary Economics, Vol. 10(2). Pp. 139-162, 1982.
[26] M. H. Pesaran, and B. Pesaran, "Working with Microfit 4.0: Interactive
Econometric Analysis," Oxford, Oxford University Press, 1997.
[27] M. H. Pesaran, Y. Shin and R. Smith, "Pooled mean group estimation of
dynamic heterogeneous panels," Journal of the American Statistical
Association, Vol. 94, pp. 621-34, 1998.
[28] J. Laurenceson and J. C. H. Chai, "Financial Reform and Economic
Development in China," Chelteham, UK, Edward Elgar, 2003.
[29] A. Banerjee, J. J. Dolado, J. W. Galbraith and D. F. Hendry,
Cointegration, Error Correction, and the Econometric Analysis of Nonstationary
Data. Oxford, Oxford University Press, 1993.
[30] M.H. Pesaran, Y. Shin, and R. J. Smith, "Bounds Testing Approaches to
the Analysis of Long-Run Relationship," Journal of Applied
Econometrics, Vol. 16, pp. 289-326, 2001
[31] P. K. Narayan and R. Smyth, "Temporal Causality and the Dynamics of
Exports, Human Capital and Real Income in China," International
Journal of Applied Economics, Vol. 1(1), pp. 24-45, September 2004.
[1] K. Marsden, "Links between taxes and economic growth," World Bank
Staff Working Paper Number 605, 1983, The World Bank, Washington,
D.C.
[2] S. J. Kim, "Growth effect of taxes in an endogenous growth model: to
what extent do taxes affect economic growth?," Journal of Economic
Dynamics and Control, Vol. 23, pp. 125-158, 1997.
[3] R. E. Lucas, "Supply-side economics: an analytical review," Oxford
Economic Papers, Vol. 42, pp. 293-316, 1990.
[4] L. E. Jones and R.E. Manuelli, "A convex model of equilibrium
growth," Journal of Political Economy, Vol. 98. pp. 1008-1038, 1990.
[5] S. T. Rebelo, "Long run policy analysis and long run growth," Journal
of Political Economy, Vol. 99, pp. 500-521, 1991.
[6] R. G. King and S. T. Rebelo, "Public policy and economic growth:
developing neoclassical implications," Journal of Political Economy,
Vol. 98. pp. 126-149, 1990.
[7] C. Yuen, "Taxation, human capital accumulation, and economic
growth," PhD. dissertation, University of Chicago, Chicago, 1991.
[8] F. Schneider and B. Frey, "Informal and underground economy,"
Economics in Ashenfelter, Orley. International Encyclopedia of Social
and Behavioral Science Vol. 12, Elsevier Science Publishing Company,
Amsterdam, 2001.
[9] R.J. Chelliah, "Trends in Taxation in Developing Countries," IMF Staff
Papers, Vol. 18, No. 2, pp. 254-325, July 1971.
[10] B. Yasmin and H. Rauf, "Measuring the underground economy and its
impact on the economy of Pakistan," The Lahore Journal of Economics,
Vol. 9(2). Pp. 93-103, 2003.
[11] Pakistan Economic Survey (various issues), Ministry of Finance,
Islamabad, Pakistan.
[12] D. J. Pyle, "Tax Evasion and the Black Economy," The Macmillan Press
Ltd, 1989.
[13] P. Wang and C. K. Yip, "Taxation and Economic Growth: The Case of
Taiwan," American Journal of Economics and Sociology, Vol. 51(3), pp.
317-331, 1992.
[14] R. Burgess. and N. Stern, "Taxation and Development," Journal of
Economic Literature, Vol.. 31 (2), pp. 762-830, 1993.
[15] S. Robinson, A. Y├║nez-Naude, R. Hinojosa-Ojeda, J.D. Lewis and S.
Devarajan, "From Stylized to Applied Models: Building Multisector
CGE Models for Policy Analysis," North American Journal of
Economics and Finance, Vol. 10, pp. 5-38, 1999.
[16] A. P. Maingot and D. Mitchell, "Taxing Free Riders," Foreign Policy,
Vol. 132, pp 6-8, 2002.
[17] K. Beckmann, "Tax Progression and Evasion: a Simple Graphical
Approach," Andrássy Working Paper Series No. III, Universidad
Budapest, Hungary, 2003.
[18] M. A. Kemal, "Underground Economy and Tax Evasion in Pakistan: A
Critical Evaluation," Research Report No.184, Pakistan Institute of
Development Economics. Islamabad, 2003.
[19] A. Sandmo, "The theory of tax evasion: A retrospective view,"
Discussion paper 31/04, Norwegian School of Economics and Business
Administration, Norway, 2004.
[20] J. V. Martinez, "Pakistan: A Preliminary Assessment of the Federal Tax
System," International Studies Program Working Paper Series, Andrew
Young School of Policy Studies, Georgia State University, USA, 2006.
[21] Statistical Bulletin of Pakistan (various issues), State Bank of Pakistan,
Pakistan
[22] Statistical Year Book of Pakistan (various issues), Federal Bureau of
Statistics, Islamabad, Pakistan.
[23] G. S. Maddala and In-Moo Kim, "Unit Roots, Cointegration, and
Structural Change," Cambridge, Cambridge University Press, 2003.
[24] P. Perron, "The Great Crash, the Oil Price Shock, and the Unit Root
Hypothesis," Econometrica, Vol. 57(6), pp. 1361-1401, 1989.
[25] C. R. Nelson and C. R. Plosser, "Trends and random walks in
macroeconomic time series: Some evidence and implications," Journal
of Monetary Economics, Vol. 10(2). Pp. 139-162, 1982.
[26] M. H. Pesaran, and B. Pesaran, "Working with Microfit 4.0: Interactive
Econometric Analysis," Oxford, Oxford University Press, 1997.
[27] M. H. Pesaran, Y. Shin and R. Smith, "Pooled mean group estimation of
dynamic heterogeneous panels," Journal of the American Statistical
Association, Vol. 94, pp. 621-34, 1998.
[28] J. Laurenceson and J. C. H. Chai, "Financial Reform and Economic
Development in China," Chelteham, UK, Edward Elgar, 2003.
[29] A. Banerjee, J. J. Dolado, J. W. Galbraith and D. F. Hendry,
Cointegration, Error Correction, and the Econometric Analysis of Nonstationary
Data. Oxford, Oxford University Press, 1993.
[30] M.H. Pesaran, Y. Shin, and R. J. Smith, "Bounds Testing Approaches to
the Analysis of Long-Run Relationship," Journal of Applied
Econometrics, Vol. 16, pp. 289-326, 2001
[31] P. K. Narayan and R. Smyth, "Temporal Causality and the Dynamics of
Exports, Human Capital and Real Income in China," International
Journal of Applied Economics, Vol. 1(1), pp. 24-45, September 2004.
@article{"International Journal of Business, Human and Social Sciences:62916", author = "M. Ilyas and M. W. Siddiqi", title = "The Impact of Revenue Gap on Economic Growth: A Case Study of Pakistan", abstract = "This study employs auto-regressive distributed lag (ARDL) bounds approach to cointegration for long run and errorcorrection modeling (ECM) for short run analysis to examine the relationship between revenue gap and economic growth for Pakistan using annual time series data over the period 1980 to 2008. The short and long run results indicate that revenue gap is statistical significant and negatively effect economic growth. The significant and negative coefficient of error correction term in ECM indicates that after a shock, the long rum equilibrium will again converge towards equilibrium about 10.406 percent within a year.
", keywords = "ARDL cointegration, Economic Growth, RevenueGap, Pakistan.", volume = "4", number = "7", pages = "1826-6", }
