Tax Buoyancy in Sub‐Saharan Africa: An Empirical Exploration

Abstract

AbstractIn this paper we provide short‐ and long‐run tax buoyancy estimates for 37 sub‐Saharan African countries for the period 1990–2015. By means of Mean Group and Pooled Mean Group estimators, we find that in 19 out of 37 countries growth has improved fiscal sustainability over time. Moreover, in only 11 out of 37 countries the tax system has acted as a good automatic stabilizer; Furthermore, tax buoyancy seems to be larger during contractions than during times of economic expansions. Finally, countries with a relatively larger agricultural sector (human capital index and stronger institutions) show a lower (higher) long‐run buoyancy coefficient estimate, while high inflation and economic volatility reduce that ability to maximize tax collection.