Taxation and Economic Growth: Evidence from Nonlinear Model in Nigeria

Abstract

Driven by the possibility of heterogenoues behavior among entrepreneurs and other economic agents, this study examined the link between taxation and economic growth for Nigeria. Our results show that the relationship between the two constructs are nonlinear and changes in the RGDP is very sensitive to changes in taxation such that any increase in tax may lead to the exit of low-ability entrepreneurs, thereby creating platform for possibility of marginal decline in growth. Our study offers some policy implications.