This study examined the relationship between tax structure and economic growth in Nigeria using annual data between 1970 to 2007. The motivation is to track the impact of the observed change in the tax structure on economic growth in order to inform policy. Two tax structures namely pre Value Added Tax (VAT) and post VAT were identified and their impacts evaluated.
The empirical analysis was anchored on the endogenous growth theoretical framework which allowed for linking tax structures to growth. Econometric models were then developed to explore the relationship between the identified tax structures and economic growth. The first model present a growth equation with average tax rate variable, while the second model is where the specific tax variables were included alongside variables in the first model. The third, fourth and fifth models were used to test the robustness of the second model. This was accomplished basically by introducing additional variables. Prior to the empirical estimations, the standard tests of unit root and co-integration analysis were conducted to ascertain the appropriate estimation procedure and technique(s) to use. The unit root test show that all the variables of the models are stationary at the first difference, while the co-integration analysis indicates that one model out of the five models had no co-integrating relationship, while the rest had co integrating relationships. On the basis of these tests results, the model for which we found no co-integrating relationship was estimated using the Vector Auto Regression (VAR) technique while the others with co-integrating relationship were estimated via the Error Correction Modeling (ECM) technique. Further to this, the Granger Causality test was also conducted to ascertain the direction of causality among the variables of the model.
The estimated results show that in the first model, average tax bears insignificant relationship with growth rate of real GDP. Likewise, following the introduction of specific tax variables in the modeling, average tax rate and other tax variables were not significant in the determination of economic growth in Nigeria. The results obtained from robustness check models indicate that the signs and significance levels of the tax variables varied with other policy variables that are applied in conjunction with the tax variables. [...]
Table of Contents
- Abstract
- Chapter 1: Introduction
- Chapter 2: Literature Review
- Chapter 3: Methodology
- Chapter 4: Data Analysis and Results
- Chapter 5: Discussion of Findings and Policy Recommendations
Objectives and Key Themes
This dissertation aims to investigate the relationship between tax structure and economic growth in Nigeria from 1970 to 2007. It seeks to analyze the impact of changes in tax structure, specifically the introduction of Value Added Tax (VAT), on economic growth and inform policy recommendations.
- Impact of tax structure on economic growth in Nigeria.
- Comparison of pre- and post-VAT tax structures and their effects.
- Econometric modeling and analysis of the relationship between tax variables and GDP growth.
- Granger causality testing to determine the direction of causality between variables.
- Policy recommendations based on empirical findings.
Chapter Summaries
Chapter 1: Introduction: This chapter sets the stage for the dissertation by introducing the research problem, which focuses on the impact of Nigeria's tax structure on economic growth. It highlights the significance of understanding this relationship for effective policymaking. The chapter establishes the research objectives, outlining the methodology that will be used to examine the pre- and post-VAT tax structures and their effects on GDP growth. It also provides a brief overview of the dissertation's structure and organization. The introductory chapter sets the theoretical framework for the subsequent data analysis and interpretation of results.
Chapter 2: Literature Review: This chapter provides a comprehensive review of existing literature on the relationship between tax structure and economic growth. It examines various theoretical perspectives and empirical studies conducted in different contexts. The review critically assesses the methodologies and findings of previous research, highlighting the gaps in knowledge that this dissertation aims to address. The chapter synthesizes the existing body of knowledge to establish the context and justification for this study's approach and expected contributions to the field. It critically assesses different models and approaches used to assess the impact of taxation on economic growth, laying the foundation for the model selection in the empirical analysis.
Chapter 3: Methodology: This chapter details the methodological approach employed in the study. It explains the choice of data (annual data from 1970 to 2007), the econometric models used (including growth equations with average tax rates and specific tax variables), and the statistical techniques applied (unit root tests, co-integration analysis, Vector Auto Regression (VAR), and Error Correction Modeling (ECM)). The chapter justifies the selection of these methods based on the characteristics of the data and the research questions. It clearly outlines the steps involved in the empirical analysis, ensuring transparency and reproducibility of the findings.
Chapter 4: Data Analysis and Results: This chapter presents the findings of the empirical analysis. It reports the results of the unit root and co-integration tests, indicating the stationarity properties of the variables and the existence of co-integrating relationships among them. The chapter then presents the estimated results of the various econometric models, focusing on the significance and magnitude of the tax variables' impact on GDP growth. It carefully interprets the results obtained from the different models, comparing and contrasting the findings. The presentation of the Granger causality test results is also included, assessing any causal relationships between the variables studied.
Chapter 5: Discussion of Findings and Policy Recommendations: This chapter analyzes and interprets the findings from Chapter 4. It discusses the implications of the results for understanding the relationship between tax structure and economic growth in Nigeria. It specifically assesses the impact of the introduction of VAT on economic growth and highlights the significance of the findings. Based on the empirical results and the broader literature, policy recommendations are made to improve tax policy and enhance its positive impact on economic growth in Nigeria. The discussion emphasizes the practical implications of the findings for policy-makers and suggests strategies for optimizing the effectiveness of tax policies.
Keywords
Tax Structure, Economic Growth, Nigeria, Value Added Tax (VAT), Econometrics, Co-integration, Error Correction Model (ECM), Granger Causality, GDP Growth, Tax Policy
Frequently Asked Questions: Dissertation on Tax Structure and Economic Growth in Nigeria
What is the overall focus of this dissertation?
This dissertation investigates the relationship between tax structure and economic growth in Nigeria from 1970 to 2007, specifically analyzing the impact of Value Added Tax (VAT) introduction on economic growth and providing policy recommendations.
What are the key objectives of this research?
The main objectives are to analyze the impact of tax structure on Nigerian economic growth, compare pre- and post-VAT tax structures and their effects, employ econometric modeling to assess the relationship between tax variables and GDP growth, use Granger causality testing to determine causality between variables, and provide policy recommendations based on the findings.
What is covered in each chapter of the dissertation?
Chapter 1 (Introduction): Introduces the research problem, objectives, methodology, and dissertation structure. Chapter 2 (Literature Review): Reviews existing literature on tax structure and economic growth, highlighting knowledge gaps. Chapter 3 (Methodology): Details the data, econometric models (including growth equations), and statistical techniques used (unit root tests, co-integration, VAR, ECM). Chapter 4 (Data Analysis and Results): Presents the empirical findings, including unit root and co-integration test results, econometric model estimations, and Granger causality test results. Chapter 5 (Discussion of Findings and Policy Recommendations): Analyzes the findings, discusses their implications for understanding the relationship between tax structure and economic growth in Nigeria, and provides policy recommendations for improving tax policy.
What data and methods are used in the empirical analysis?
The study uses annual data from 1970 to 2007. Econometric models, including growth equations with average tax rates and specific tax variables, are employed. Statistical techniques such as unit root tests, co-integration analysis, Vector Auto Regression (VAR), and Error Correction Modeling (ECM) are used to analyze the data.
What are the key findings and policy implications?
The dissertation presents the results of econometric models, focusing on the significance and magnitude of tax variables' impact on GDP growth. It includes Granger causality test results to determine causal relationships. Based on these findings, policy recommendations are made to enhance the positive impact of tax policies on economic growth in Nigeria.
What are the keywords associated with this dissertation?
Tax Structure, Economic Growth, Nigeria, Value Added Tax (VAT), Econometrics, Co-integration, Error Correction Model (ECM), Granger Causality, GDP Growth, Tax Policy.
What is the significance of this research?
Understanding the relationship between tax structure and economic growth is crucial for effective policymaking. This dissertation contributes to this understanding by providing empirical evidence specific to Nigeria and offering policy recommendations to improve tax policy and enhance its positive impact on economic growth.
- Quote paper
- Damian Nwosu (Author), 2010, Tax Structure And Economic Growth In Nigeria, Munich, GRIN Verlag, https://www.grin.com/document/183035
