Authors: Juniours Marire; Tafirenyika Sunde
Addresses: NANGO, PO Box CY250, Causeway, Harare, Zimbabwe ' School of Business Management, Department of Economics, Polytechnic of Namibia, Private Bag 13388, Windhoek, Namibia
Abstract: We examine the tax-growth nexus in Zimbabwe using parametric and non-parametric analysis. We use a two-stage estimation procedure that first generates efficiency scores for the country using a Data Envelopment Approach. We use the efficiency scores in the second stage to normalise growth to get a proxy for potential economic growth. Using this potential growth we run a translog model that allows computation of time-varying elasticities of growth to changes in tax policy. The translog model results we got indicate that economic growth is inelastic to tax structure in Zimbabwe. As such, we recommend policies that rely on non-tax stimuli to the economy to buttress growth. We find that the most inefficient years were those punctuated with bad economic governance and droughts.
Keywords: tax structure; economic growth; Zimbabwe; translog model; efficiency scores; structural adjustment policy; unit roots; DEA; data envelopment analysis; economic policy; emerging economies; taxation; tax policy; modelling; governance.
International Journal of Economic Policy in Emerging Economies, 2012 Vol.5 No.2, pp.105 - 121
Received: 30 May 2011
Accepted: 21 Nov 2011
Published online: 12 Aug 2012 *