An analysis of the impact of fiscal policy on income distribution in Namibia
Keywords:
Income distribution, fiscal policy, taxation, government expenditure, NamibiaAbstract
This research analyses the statistical relationship between income distribution and seven taxation and government expenditure components in the Southern African country, Namibia, using data from 1996-2016. The research is aimed at creating new knowledge on the research topic because no literature exists for Namibia on this. The Autoregressive Distributed Lag (ARDL) cointegration technique was employed to assess the long-run relationship between the dependent and independent variables. The research findings indicated that there is no long-run relationship between the dependent variable, income distribution, and the relevant independent variables. In the short-run, the research findings indicate that government expenditure on social pensions and government expenditure on education has a balancing or reducing effect on income distribution, while a tax on products, corporate income tax, and customs and excise duties have an unbalancing and/or worsening effect on income distribution. Based on these findings, tertiary education loans are recommended as opposed to grants to ensure the sustainability of the Namibia Students Financial Assistance Fund (NASFAF). In adjusting corporate and value-added taxes, the government is cautioned to avoid overburdening consumers and employees through tax shifting in the form of high prices of goods and services and low wages and benefits. A tax mix, tax discrimination, and a hybrid of taxation and government expenditure components are strongly recommended to achieve a balance and the sustainable development goal (SDG) of reduced income inequality.
References
African Development Bank Group. (2017). African Economic Outlook 2017. [Online]
Available at: https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/AEO_2017_Report_Full_English.pdf
[Accessed 30 08 2017].
Alesina, A. & Rodrik, D. (1994). Distributive Politics. The Quarterly Journal of Economics, II(109), pp. 465-490.
Auld, D. & Miller, F. (1977). Principles of Public Finance. Toronto: s.n.
Austerio, D. & Hall, S. (2011). Applied Econometrics. 2nd ed. Palgrave: Macmillan.
Bank of Namibia. (2013). 15th Annual Symposium, Windhoek: Bank of Namibia.
Bank of Namibia. (2015). Bank of Namibia Annual Report. [Online]
Available at: <https://www.bon.com.na/CMSTemplates/Bon/Files/bon.com.na/fe/fe94b2aa-9025-426b-9192-132a8ff673bd.pdf>
[Accessed 04 05 2017].
Barro, R. (1990). Government Spending in a Simple Model of Endogenous Growth.. Journal of Political Economy, V(98), pp. 103-125..
Berry, W. D. & Feldman, S. (1985). Multiple Regression in Practice. London: Sage Publications.
Bird, M. R. (1971). "Wagner's Law of Expending State Activity". Public Finance, I(26), pp. 1-26.
Biwas, S., Chakraborty, I. & Hai, R. (2017). Income inequality, Tax policy, and Economic growth. The Economic Journal, Issue 127, pp. 688-727.
Brown-Collier, E. K. & Collier, B. E. (1995). What Keynes really said about Deficit Spending. Journal of Post Keynesian Economics, III(17), pp. 341-355.
Elliott, G., Rothernberg, T. J. & H., J. (1996). Efficient Tests for an Autoregressive Unit Root. Econometrica, IV(64), pp. 813-836.
Fourie, F. & Burger, P. (2013). How to think and reason in Macroeconomics. 3rd ed. Claremont : Mthunzi Nxawe Publishing .
Government of the Republic of Nammibia, 2016. National Equitable Economic Empowerment Framework, Windhoek: Parliament.
Griffin, K. (1999). Alternative strategies for economic development. 2nd ed. New York City: St. Martin Press.
Hayami, Y. (1998). Development Economics. New York: Oxford University Press.
Horvath, M. T. & Watson, M. W. (1995). Testing for cointergration when some of the cointegrating vectors are prespecified. Econometric Theory, Issue 11, pp. 984-1014.
John Hopkins Bloomberg school of Public Health (2018). Biostatistics. [Online]
Available at: http://www.biostat.jhsph.edu/~iruczins/teaching/jf/ch10.pdf
[Accessed 20 06 2018].
Jorge, M.-V., Moreno-Dodson, B. & Vulovic, V. (2012). The impact of Taxation and Expenditure policies on income distribution : Evidence from a large panel of countries, Atlanta: Geogia State University.
Kaplow, L. (1996). The optimal supply of public goods and the distributional cost of taxation. National Tax Journal, IV(49), pp. 513-533.
Keynes, J. M. (1926). The end of laissez-faire. London: Hogarth press.
Keynes, J. M. (1936). The General Theory of Employment, Interest and Money, London: Macmillan.
Kuznets, S. (1980). Growth, Population and Income Distribution. New York City: WW Norton & CO.
Leu, E. R., Rene, L. F. & Brigitte, B. (2009). Taxes, Expenditure and Income Distribution in Switzeland. Journal of Social Policy , 14(3), pp. 341-360.
Maina, A. W. (2017). The effect of consumption taxes on poverty and income inequality in Kenya. International Journal of Accounting and Taxation, V(5), pp. 56-82.
Manning, W. G. & Mullahy, J.(2001). Estimating log models: to transform or not to transform. Journal of Health Economics, 2001(20), pp. 461-494.
McConnell, C. R. & Brue, S. L., 2002. Economics: Principles, Problems and Policies. 15th ed. New York: Von Hoffmann Inc.
Meier, G. & Rauch, J. (2005). Leading issues in economic development. 8th ed. New York: Oxford University Press.
Meltzer, A. H. & Richard, S. F. (1981). A Rational Theory of the Size of Government. Journal of Political Economy, 5(89), pp. 914-927.
Meltzer, A. H. & Richard, S. F. (1983). Tests of a Rational theory of the size of Government. Public Choice, III(41), pp. 403-418.
Mieszkowski, P. (1969). Tax incidance Theory: The effects of taxes on the distribution of income. Journal of Economic literature, V(7), pp. 1103-1124.
Ministry of Finance. (2018). Ministry of Finance. [Online]
Available at: http://www.mof.gov.na/legislation
[Accessed 16 07 2018].
Ministry of Finance. (2018). Ministry of Finance. [Online]
Available at: http://www.mof.gov.na/customs-and-excise
[Accessed 19 07 2018].
Munday, S. C. R. (1996). Current developments in economics. New York: ST. Martin's Press INC.
Mylonidis, N. & Losifidi, M. (2017). Relative effective taxationand income inequality: Evedance from OECD countries. Journal of European Social Policy, I(27), pp. 57-76.
Nafziger, W. (2006). Economic development. Kansas State: cambridge University Press.
Namibia. (2017). Revenue Agency Act, Windhoek : Parliament.
National Institute of Standards and Technology. (2018). Information Technology Laboratory. [Online]
Available at: https://www.itl.nist.gov/div898/handbook/pmc/section4/pmc442.htm
[Accessed 21 06 2018].
National Planning Commission. (2012). Namibia's Fourth National Development Plan - NDP 4. Windhoek: National Planning Commision .
National Planning Commission. (2017). 5th National Development Plan, Windhoek: National Planning Commission.
Office of the President. (2004). Ministry of Finance. [Online]
Available at: http://www.mof.gov.na/documents/27827/169990/VISION_2030.pdf/6ca6fcd5-e512-44de-97be-031559595f7b
[Accessed 01 08 2018].
Office of the President. (2004). Namibia Vision 2030. Windhoek: NAMPRINT.
Office of the Prime Minister. (2005). GRN Portal. [Online]
Available at: http://www.opm.gov.na/
[Accessed 14 06 2018].
Office of the Prime Minister. (2008). Draft TESEF, Windhoek: Office of the Prime Minister .
Osborne, J. W. & Waters, E. (2002). Practical Assessment, Research and Evaluation. A Peer-reviewed Electronic Jour, II(8), pp. 1-5.
Parkin, M. (2016). Economics. 12th ed. London : Pearson Education.
Parkin, M. & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrica, 2(75), pp. 335-346.
Peacock, A. & Wiseman, J. (1961). The National Bureau of Economic Research. [Online]
Available at: http://www.nber.org/chapters/c2304
[Accessed 22 09 2018].
Peacock, A. & Wiseman, J. (1967). Growth of Public Expenditure in the United Kingdom. Rev. edn ed. London: George Allen & Unwin Ltd..
Phillips, P. C. B. & Ouliaris, S. (1990). Asymptotic properties of residual based tests for cointergration. Econometrica, I(58), pp. 165-193.
Phillips, P. C. B. & Perron, P. (1988). Testing for a unit root in time series regression. Biometrica, 75(2), pp. 335-346.
Pigou, A. (1932). The economics of welfare. 4th ed. London: Macmillan Press.
Rao, A. (2007). Randomness Extractors for Independent Sources and Applica, Texas: The University of Texas at Austin.
Reddy, K. (1972). The growth of public expenditure in India, 1872-1968 : a secular and time pattern analysis, New Delhi: Sterling Publishers.
Samuelson, P. (1954). The pure theory of public expenditure. The review of economics and statistics, Issue 36, pp. 387-389.
Samuelson, P. A.(1955). Diagrammatic Exposition of a Theory of Public Expenditure. The Review of Economics and Statistics, 37(4), pp. 350-356.
Samuelson, P. A. (1958). Aspects of Public Expenditure Theories. The Review of Economics and Statistics, IV(40), pp. 332-338.
Smith, A. (1776). Inquiry into the nature and causes of the wealth of nations. London: W. Strahan and T. Cadell.
Snowdon, B. & Vane, H. R. (2005). Modern Macroeconomics. Cheltenham: Edward Elgar Publishing, INC.
Southern African Customs Union (2013). Member states. [Online]
Available at: http://www.sacu.int/
[Accessed 27 06 2017].
Sylwester, K. (2002). Can education expenditures reduce income inequality?. Economics of Education Review, Issue 22, pp. 43-52.
Tsanos, T. & Manos, A. (1999). On the distributional impact of public education: evidence from Greece. Economics of Education Review, 18(1999), pp. 439-452.
UNAIDS. (2017). UNAIDS. [Online]
Available at: http://www.unaids.org/en/regionscountries/countries/namibia
[Accessed 22 07 2018].
United Nations Develpment Programme. (2016). Human Development Reports. [Online]
Available at: http://hdr.undp.org/en/content/income-gini-coefficient
[Accessed 08 05 2017].
Vaalavuo, M. (2013). The redistributive impact of 'old' and 'new' social spending. Journal of Social Policy , III(42), pp. 513-539.
Wittenberg, M. (2017). Wages and wage inequality in South Africa. South African Journal of Economics , II(85), pp. 279-318.
Word Bank. (2016). World Bank Group: Ease of doing Business. [Online]
Available at: http://www.doingbusiness.org/data/exploreeconomies/namibia/
[Accessed 03 05 2017].
Available at: https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/AEO_2017_Report_Full_English.pdf
[Accessed 30 08 2017].
Alesina, A. & Rodrik, D. (1994). Distributive Politics. The Quarterly Journal of Economics, II(109), pp. 465-490.
Auld, D. & Miller, F. (1977). Principles of Public Finance. Toronto: s.n.
Austerio, D. & Hall, S. (2011). Applied Econometrics. 2nd ed. Palgrave: Macmillan.
Bank of Namibia. (2013). 15th Annual Symposium, Windhoek: Bank of Namibia.
Bank of Namibia. (2015). Bank of Namibia Annual Report. [Online]
Available at: <https://www.bon.com.na/CMSTemplates/Bon/Files/bon.com.na/fe/fe94b2aa-9025-426b-9192-132a8ff673bd.pdf>
[Accessed 04 05 2017].
Barro, R. (1990). Government Spending in a Simple Model of Endogenous Growth.. Journal of Political Economy, V(98), pp. 103-125..
Berry, W. D. & Feldman, S. (1985). Multiple Regression in Practice. London: Sage Publications.
Bird, M. R. (1971). "Wagner's Law of Expending State Activity". Public Finance, I(26), pp. 1-26.
Biwas, S., Chakraborty, I. & Hai, R. (2017). Income inequality, Tax policy, and Economic growth. The Economic Journal, Issue 127, pp. 688-727.
Brown-Collier, E. K. & Collier, B. E. (1995). What Keynes really said about Deficit Spending. Journal of Post Keynesian Economics, III(17), pp. 341-355.
Elliott, G., Rothernberg, T. J. & H., J. (1996). Efficient Tests for an Autoregressive Unit Root. Econometrica, IV(64), pp. 813-836.
Fourie, F. & Burger, P. (2013). How to think and reason in Macroeconomics. 3rd ed. Claremont : Mthunzi Nxawe Publishing .
Government of the Republic of Nammibia, 2016. National Equitable Economic Empowerment Framework, Windhoek: Parliament.
Griffin, K. (1999). Alternative strategies for economic development. 2nd ed. New York City: St. Martin Press.
Hayami, Y. (1998). Development Economics. New York: Oxford University Press.
Horvath, M. T. & Watson, M. W. (1995). Testing for cointergration when some of the cointegrating vectors are prespecified. Econometric Theory, Issue 11, pp. 984-1014.
John Hopkins Bloomberg school of Public Health (2018). Biostatistics. [Online]
Available at: http://www.biostat.jhsph.edu/~iruczins/teaching/jf/ch10.pdf
[Accessed 20 06 2018].
Jorge, M.-V., Moreno-Dodson, B. & Vulovic, V. (2012). The impact of Taxation and Expenditure policies on income distribution : Evidence from a large panel of countries, Atlanta: Geogia State University.
Kaplow, L. (1996). The optimal supply of public goods and the distributional cost of taxation. National Tax Journal, IV(49), pp. 513-533.
Keynes, J. M. (1926). The end of laissez-faire. London: Hogarth press.
Keynes, J. M. (1936). The General Theory of Employment, Interest and Money, London: Macmillan.
Kuznets, S. (1980). Growth, Population and Income Distribution. New York City: WW Norton & CO.
Leu, E. R., Rene, L. F. & Brigitte, B. (2009). Taxes, Expenditure and Income Distribution in Switzeland. Journal of Social Policy , 14(3), pp. 341-360.
Maina, A. W. (2017). The effect of consumption taxes on poverty and income inequality in Kenya. International Journal of Accounting and Taxation, V(5), pp. 56-82.
Manning, W. G. & Mullahy, J.(2001). Estimating log models: to transform or not to transform. Journal of Health Economics, 2001(20), pp. 461-494.
McConnell, C. R. & Brue, S. L., 2002. Economics: Principles, Problems and Policies. 15th ed. New York: Von Hoffmann Inc.
Meier, G. & Rauch, J. (2005). Leading issues in economic development. 8th ed. New York: Oxford University Press.
Meltzer, A. H. & Richard, S. F. (1981). A Rational Theory of the Size of Government. Journal of Political Economy, 5(89), pp. 914-927.
Meltzer, A. H. & Richard, S. F. (1983). Tests of a Rational theory of the size of Government. Public Choice, III(41), pp. 403-418.
Mieszkowski, P. (1969). Tax incidance Theory: The effects of taxes on the distribution of income. Journal of Economic literature, V(7), pp. 1103-1124.
Ministry of Finance. (2018). Ministry of Finance. [Online]
Available at: http://www.mof.gov.na/legislation
[Accessed 16 07 2018].
Ministry of Finance. (2018). Ministry of Finance. [Online]
Available at: http://www.mof.gov.na/customs-and-excise
[Accessed 19 07 2018].
Munday, S. C. R. (1996). Current developments in economics. New York: ST. Martin's Press INC.
Mylonidis, N. & Losifidi, M. (2017). Relative effective taxationand income inequality: Evedance from OECD countries. Journal of European Social Policy, I(27), pp. 57-76.
Nafziger, W. (2006). Economic development. Kansas State: cambridge University Press.
Namibia. (2017). Revenue Agency Act, Windhoek : Parliament.
National Institute of Standards and Technology. (2018). Information Technology Laboratory. [Online]
Available at: https://www.itl.nist.gov/div898/handbook/pmc/section4/pmc442.htm
[Accessed 21 06 2018].
National Planning Commission. (2012). Namibia's Fourth National Development Plan - NDP 4. Windhoek: National Planning Commision .
National Planning Commission. (2017). 5th National Development Plan, Windhoek: National Planning Commission.
Office of the President. (2004). Ministry of Finance. [Online]
Available at: http://www.mof.gov.na/documents/27827/169990/VISION_2030.pdf/6ca6fcd5-e512-44de-97be-031559595f7b
[Accessed 01 08 2018].
Office of the President. (2004). Namibia Vision 2030. Windhoek: NAMPRINT.
Office of the Prime Minister. (2005). GRN Portal. [Online]
Available at: http://www.opm.gov.na/
[Accessed 14 06 2018].
Office of the Prime Minister. (2008). Draft TESEF, Windhoek: Office of the Prime Minister .
Osborne, J. W. & Waters, E. (2002). Practical Assessment, Research and Evaluation. A Peer-reviewed Electronic Jour, II(8), pp. 1-5.
Parkin, M. (2016). Economics. 12th ed. London : Pearson Education.
Parkin, M. & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrica, 2(75), pp. 335-346.
Peacock, A. & Wiseman, J. (1961). The National Bureau of Economic Research. [Online]
Available at: http://www.nber.org/chapters/c2304
[Accessed 22 09 2018].
Peacock, A. & Wiseman, J. (1967). Growth of Public Expenditure in the United Kingdom. Rev. edn ed. London: George Allen & Unwin Ltd..
Phillips, P. C. B. & Ouliaris, S. (1990). Asymptotic properties of residual based tests for cointergration. Econometrica, I(58), pp. 165-193.
Phillips, P. C. B. & Perron, P. (1988). Testing for a unit root in time series regression. Biometrica, 75(2), pp. 335-346.
Pigou, A. (1932). The economics of welfare. 4th ed. London: Macmillan Press.
Rao, A. (2007). Randomness Extractors for Independent Sources and Applica, Texas: The University of Texas at Austin.
Reddy, K. (1972). The growth of public expenditure in India, 1872-1968 : a secular and time pattern analysis, New Delhi: Sterling Publishers.
Samuelson, P. (1954). The pure theory of public expenditure. The review of economics and statistics, Issue 36, pp. 387-389.
Samuelson, P. A.(1955). Diagrammatic Exposition of a Theory of Public Expenditure. The Review of Economics and Statistics, 37(4), pp. 350-356.
Samuelson, P. A. (1958). Aspects of Public Expenditure Theories. The Review of Economics and Statistics, IV(40), pp. 332-338.
Smith, A. (1776). Inquiry into the nature and causes of the wealth of nations. London: W. Strahan and T. Cadell.
Snowdon, B. & Vane, H. R. (2005). Modern Macroeconomics. Cheltenham: Edward Elgar Publishing, INC.
Southern African Customs Union (2013). Member states. [Online]
Available at: http://www.sacu.int/
[Accessed 27 06 2017].
Sylwester, K. (2002). Can education expenditures reduce income inequality?. Economics of Education Review, Issue 22, pp. 43-52.
Tsanos, T. & Manos, A. (1999). On the distributional impact of public education: evidence from Greece. Economics of Education Review, 18(1999), pp. 439-452.
UNAIDS. (2017). UNAIDS. [Online]
Available at: http://www.unaids.org/en/regionscountries/countries/namibia
[Accessed 22 07 2018].
United Nations Develpment Programme. (2016). Human Development Reports. [Online]
Available at: http://hdr.undp.org/en/content/income-gini-coefficient
[Accessed 08 05 2017].
Vaalavuo, M. (2013). The redistributive impact of 'old' and 'new' social spending. Journal of Social Policy , III(42), pp. 513-539.
Wittenberg, M. (2017). Wages and wage inequality in South Africa. South African Journal of Economics , II(85), pp. 279-318.
Word Bank. (2016). World Bank Group: Ease of doing Business. [Online]
Available at: http://www.doingbusiness.org/data/exploreeconomies/namibia/
[Accessed 03 05 2017].
Published
2020-12-07
How to Cite
Indongo, A., & Robinson, Z. (2020). An analysis of the impact of fiscal policy on income distribution in Namibia: Array. Acta Universitatis Danubius. Œconomica, 17(1). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/425
Issue
Section
Business Administration and Business Economics
License
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
