The Effects of the Value-Added Tax on Revenue and Inequality

Kaisa Alavuotunki, Mika Haapanen, Jukka Olavi Pirttilä

Research output: Contribution to journalArticleScientificpeer-review


This paper examines the impact of the introduction of the value-added tax on inequality and government revenues using newly released macro data. We present both conventional country fixed effect regressions and instrumental variable analyses, where VAT adoption is instrumented using the previous values of neighbouring countries’ VAT systems as an instrument. The results reveal – in contrast to earlier work – that the revenue consequences of the VAT have not been positive. The results indicate that income-based inequality has increased due to the VAT adoption, whereas consumption inequality has remained unaffected.
Original languageEnglish
JournalJournal of Development Studies
Issue number4
Pages (from-to)490-508
Number of pages19
Publication statusPublished - 3 Apr 2019
MoE publication typeA1 Journal article-refereed

Fields of Science

  • 511 Economics
  • income inequality
  • globalization
  • panel

Cite this