TY - BOOK ID - 85505368 TI - State Institutions and Tax Capacity: An Empirical Investigation of Causality PY - 2019 SN - 1513511556 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Econometrics KW - Public Finance KW - Taxation KW - Structure, Scope, and Performance of Government KW - Tax Evasion and Avoidance KW - 'Panel Data Models KW - Spatio-temporal Models' KW - Taxation, Subsidies, and Revenue: General KW - Multiple or Simultaneous Equation Models KW - Multiple Variables: General KW - Public finance & taxation KW - Econometrics & economic statistics KW - Revenue administration KW - Vector error correction models KW - Subnational tax KW - Revenue Administration Fiscal Information Tool (RA-FIT) KW - Revenue KW - Econometric models UR - https://www.unicat.be/uniCat?func=search&query=sysid:85505368 AB - Would better state institutions increase tax collection, or would higher tax collection help improve state institutions? In the absence of conclusive guidance from theory, this paper searches for an empirical answer to this question, using a panel dataset covering 110 non-resource-rich countries from 1996 to 2017. Employing a panel vector error correction model, the paper finds that tax capacity and state institutions cause and reinforce each other for a wide range of country groups. The bi-directional causality results suggest that developing tax capacity and building state institutions need to go hand in hand for best results, particularly in developing countries. Based on the impulse response analyses, the paper also finds that the causal effects in advanced economies are generally low in both directions, while in developing countries, both tax capacity and institutions shocks have larger positive impacts on institutions and tax capacity, respectively. ER -