From Tax to TFP: Unraveling the Dynamics of Income Inequality in SAARC Economies

Abstract

From 1990 to 2021, study examines the dynamic relationship between taxation, total factor productivity (TFP), and income inequality in four SAARC countries: Bangladesh, India, Pakistan, and Sri Lanka. Using panel data analysis, the study investigates the relationship between variations in the GINI coefficient and tax-to-GDP ratios and TFP, taking labor force participation, inflation, and consumption expenditure into account. The findings demonstrate that while taxes and income inequality significantly affect TFP, the effects are different across country because of differences in economic conditions and legal systems. The study deals important new understandings into how socio-economic inequality and fiscal policy affect productivity in South Asian nations.