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This paper assesses the merits of using surveys of business perceptions of growth constraints as a guide to growth-enhancing fiscal policy reforms. Using endogenous growth models in which the government levies an income tax to provide public inputs to the production of private firms, the paper demonstrates that business perceptions of growth constraints are subject to systematic biases except when firms compare different types of public services or different types of public capital. In particular firms can be expected to systematically over-estimate the growth-enhancing effects of lower tax rates, and under-estimate the growth-enhancing effects of greater provision of public capital. It is then shown that these theoretical predictions regarding how firms rank constraints correspond closely to the observed ranking of constraints by firms in the World Bank's Enterprise Surveys

This paper evaluates the trade-off between growth and welfare maximization from two perspectives. Firstly, it synthesizes and extends endogenous growth models with public finance to compare growth and welfare maximizing tax rates. Secondly, it examines the distinct model outcomes in terms of their growth rates and welfare levels. This comparison highlights the range of trade-offs: the growth maximizing tax rate can be above, below, or equal to the welfare maximizing equivalent. We fi nd however that even relatively large differences in growth and welfare maximizing tax rates translate into relatively small differences in growth rates, and, in some cases, welfare levels.

Cover -- Contents -- I. INTRODUCTION -- II. CALCULATING FIRM LIFE CYCLE GROWTH -- A. Previous Studies -- B. This Paper -- III. STYLIZED FACTS -- A. Income Elasticity of Firm Size -- B. Variation in Firm Life Cycle Dynamics -- IV. LIFE CYCLE GROWTH DECOMPOSITION -- A. Descriptive Decomposition -- B. Econometric Decomposition--Baseline -- C. Econometric Decomposition--Extensions -- V. CONCLUSION -- VI. REFERENCES -- Figures -- 1. Firm Size and Subnational Income -- 2: Manufacturing Firm Size and Subnational Income -- 3. Average Firm Growth Over the Life Cycle -- 4. Cumulative Growth by 3-Digit Industry at age 15-19: Top and Bottom Five 3-digit -- 5. Top Performers: Firm Size and Birth Cohorts -- 6. Predicted Conditional Life Cycles -- Tables -- 1. Baseline Regressions -- 2. Baseline Regressions -- 3. Manufacturing vs. Services -- Appendices -- 1. Variable Definitions and Descriptive Statistics -- 2. Robustness Checks.

This study reviews the existing evidence on the effects of tax reforms on output levels and growth over the short and long run from different strands of the literature. It develops and applies criteria to evaluate the usefulness of ex‐post estimates to predict the effects of tax reforms ex ante. Based on these criteria, we present detailed tables summarizing and comparing ex‐post estimates of the effects of tax reforms. Overall, our review suggests that at least the direction of the short‐run and long‐run growth effects can be predicted with a reasonable degree of certainty, but there is disagreement with respect to the magnitude. Our review also suggests that depending on the tax change, trade‐offs between short‐run stabilization and long‐run growth may arise and that more research on this question is needed. (JEL E62, H20, O20)

This paper exploits the unique institutional features of South Africa to estimate the impact of provincial public spending on health, education and transport on firm productivity. Our identification strategy is based on within industry-province differences between firms of the effects of public spending. We show that public spending composition affects firm productivity depending on the capital intensity of firms relative to the province-industry mean. Our data and empirical specification allow us to rule out that these results are affected by econometric problems that are commonly encountered when estimating the effects of fiscal policy and by unobserved industry- or province-specific productivity shocks. In contrast to related existing microeconomic evidence, we take into account the government budget constraint so that our results have clear policy implications.

Seit der globalen Finanz- und Wirtschaftskrise wird die Frage, ob Regierungen antizyklische Fiskalpolitik betreiben sollten, in akademischen Kreisen wieder vermehrt diskutiert. Eine vielfach benutzte Maßnahme sind temporäre schuldenfinanzierte Konsumsteuersenkungen.