With heavy debt burden on developing economies accompanied by their low credit worthiness rating, developing economies often resort to taxes for financing development projects. Raising tax rates and expanding tax bases have become frequent government activities in developing economies. Without dynamic deficit financing policy which takes into cognizance the conflicting arithmetic and economic effect of Laffer curve analysis, financing budget deficit through taxation has remained largely unsuccessful. Perhaps, what was required is to constitute latent factors operating along Laffer curve into major theoretical construct of a deficit financing policy. Therefore, study focused on identifying latent factors influencing the inter-relationship among budget deficit finance, taxes, human capital and macroeconomic indicators. Study spanned across 1970-2015. Data were sourced from Central Bank of Nigeria, National Bureau of Statistics and World Development Indicators. Data were analyzed using exploratory factor analysis. Results indicate that: (1) Tax contributed significantly to budget deficit financing (2)Tax spending and disposable personal income were latent factors influencing the effectiveness of deficit financing (3) Tax spending activated government revenue to contribute significantly to budget deficit reduction (4) Disposable personal income boosted GDP to cause reduction in budget deficit . It was concluded that, with the taxonomy of highly significant factor correlates of tax spending and disposable personal income, a viable deficit financing policy was devised with component tax, budgetary, pricing, credit and macroeconomic policies. It was recommended, inter alia, that developing economies should activate their current deficit financing policies by adapting them to their tax spend and macroeconomic policies.
Urgent need for quick action to put Nigeria and other developing economies back to the path of economic recovery has almost imposed state of emergency on these economies. Most LDCs are faced with acute shortage of development funds due to recessions accompanying incessant crashes in international financial market. Raising existing tax rates to finance budget deficit in LDCs often generates public debate on pros and cons of such policy option. Study considered Nigeria as typical case of LDCs. Study focused on establishing the effectiveness of tax-financing of budget deficit under Laffer curve theory. Study spanned across 1970-2015. Data were analyzed using ADF, CUSUM, heteroskedasticity, multiple regression, Johansen cointegration and ECM. Results indicate that: (1) Custom and exercise duties, petroleum profit tax and value-added tax contributed significantly to the reduction in budget deficit while company income tax had nonsignificant impact(2)Total government revenue constituted major chunk of planned income for budget deficit financing(3) Deficit financing of capital health expenditure yielded high returns while that of recurrent education expenditure and capital education expenditure was accompanied by low returns (4)Growth and employment generation accelerated deficit financing while private investment decelerated it (5) There were long and short-run relationships among budget deficit, taxes, human capital investment and macroeconomic indicators with significant rate of adjustment of short-run disequilibrium. Study concluded that tax-financing of budget deficit was effective under Laffer curve effect. It was recommended, among others, that LDCs should enlarge their tax bases through inclusion, to finance budget deficit.
Nigeria had adopted various development plans in order to achieve MDGs.Achievement of MDGs is crucial to effective implementation of SDGs agenda aimed at fostering inclusive, sustainable and resilient economic development. In spite of these efforts, the Nigerian economy is still characterized by low capital formation, chronic unemployment, a large percentage of the population living on primary sector and negligible savings. Indeed, Nigeria's performance in MDGs was quite unimpressive. This is partly attributable to inappropriate human capital theory of economic growth on which these development plans were based. Therefore, this study focused on building a model of inclusive, sustainable and resilient economic development which would yield potent factors and describe activities that could link human capital investment with aggregate economic activities to induce economic development with full participation of target population. The study covered the period, 1981-2014. Data were sourced from Central Bank of Nigeria, National Bureau of Statistics and World Development Indicators. Data were analyzed using exploratory factor analysis technique. Study revealed that minimum wage, girl-child education and special intervention fund were factors which influenced the relationship among human capital, real GDP and economic development. It was concluded that the outcome of this study which is a three-factor model of inclusive, sustainable and resilient economic development is essentially a human capital theory of economic development capable of linking the different sectors of the economy. It was recommended, inter alia, that a dynamic employment policy would involve economic empowerment of women through job reservation in paid labour.
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