IMPACT OF TOTAL FACTOR PRODUCTIVITY AND INCOME INEQUALITY ON TAX

Abstract

Nexus of total factor productivity, inequality, and taxes (selected SAARC Countries) along with other control variables like corruption, consumption expenditure, capital, and labor. For short and long-run elasticities along with different estimation techniques are applied. Total factor Productivity (TFP) data of  SAARC countries were unavailable, so only Pakistan, India, Bangladesh, and Sri Lanka are estimated. Tax to GDP ratio is low, and income equality is negative as it will decrease the tax revenue, and increase in anti-corruption policies will increase tax revenue, an increase in TFP will reduce in tax revenue, increase in employment, there will be an increase in tax to GDP ratio and consumption expenditure is found negative and significant on tax The results confirm that most of the variables of the long-run elasticities are significant. All the models are robust  because there is no slope heterogeneity, heteroscedasticity, multicollinearity, and cross-section dependence among the variables.