The impact of tax incentives on the growth of value-added agricultural exports - Evidence from Zimbabwe
Keywords:
Value-Added Agricultural Exports; Tax Incentives; Cointegration; Unit Root Tests; Zimbabwe
Abstract
This paper empirically examines the impact of export tax incentives on value-added agricultural export performance in Zimbabwe using historical annual time-series data from 1980-2021. The study uses unit root tests, cointegration analysis, and the Error Correction Model in the analysis. Using an augmented Cobb-Douglass production function, the study aims at determining wether export tax incentives, real effective exchange rate and value-added agricultural exports are cointegrated.. Export tax incentives and real effective exchange rate were found to have a positive and statistically significant effect in the long run on the country’s growth of value-added agricultural exports. From the results, policymakers are encouraged to deepen and broaden export tax incentives specifically targeted at value-addition of agricultural products as part of the country’s efforts in reforming its trade systemto improve the welfare of producers, workers and generate foreign currency for the country.
References
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Beno-Sani, A., & Salihu, M. (2020). Export incentive schemes and manufactured exports in Nigeria: An empirical analysis. Journal of Economic and Sustainable Development, 11(5): 27-39.
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Brixiova, Z., & Ncube, M. (2014). The real exchange rate and growth in Zimbabwe: Does the currency regime matter? IZA Discussion Paper Series No 8398.
Chand., R., Singh, R., Lal., S. (2022). Determinants of exports in a small and vulnerable economy: Fiji Islands. A disaggregated analysis. The European Journal of development research, 34:2948-2969.
Cobb, C.W. & Douglass, P.H. (1928). “A Theory of Production.” American Economic Review. 18:139-165.
Cowell, R. G., & Victoria-Feser, M. P. (1996). Robustness properties of some poverty indices. Economica, 63(250): 543-563.
Dickey, D.A., & Fuller, W.A. (1979). Distribution of estimators for autoregressive time series with unit root. Journal of the American Statistical Association, 74:427-431.
Dicle, I.A., & Dicle, U. (1992). Effects of government export policies on Turkish export trading companies. International Marketing Review, Volume 9, No 3.
Enders, W. (2014). Applied econometric time series. John Wiley & Sons.
Fanta, A. B., & Teshale, B. A. (2014). The effect of export trade incentives on export growth: Evidence from Ethiopia. Journal of Economics and International Business Research, 2(1): 1-14.
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Greene, W. H. (2011). Econometric analysis. Pearson Education India.
Gujarati, D. N., & Porter, D. C. (2010). Basic econometrics. McGraw-Hill Irwin.
Hazvina, F. (2021). An Analyis of the Impact of Chinese Competition on Zimbabwe’s Manufacturing Exports in Third Markets.
Im, K.S., Pesaran, H.M., & Shin, Y (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 11: 57-74
Johansen, S. (1988). “Statistical Analysis of Cointegration Vectors.” Journal of Economics Dynamics and Control, 12:231-254.
Khobai, H., Mbiakop, W.D., & Fani, D.C.R. (2023). Response of Agriculture Production to Change of Foreign Direct Investment and Public Agriculture Expenditure in South Africa: A Monte Carlo Simulation Analysis. International Journal of Economic and Financial Issues, 13(6), 1-7.
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Ledyaeva, S. (2017). Export subsidies and export performance: Evidence from firm-level data. Journal of Comparative Economics, 45(4): 702-722.
Levin, A., Lin, C.F., & Chu, C.S. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics, 108(1): 1-24
Maddala, G.S., & Kim, I.M. (1998). Unit roots, cointegration and structural change. Oxford University Press, Oxford, U.K.
Mankiw, N.G., Romer, D., & Weil, D.W. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107 (May): 407-437.
Medina-Smith, E.J. (2001). Export-led growth in Costa Rica: An empirical analysis for 1950-1997. CEPAL Review, (74), 115-129.
Mugumisi, N. (2014). Sectorial Deindustrialisation of Zimbabwe’s Texttiles and Clothing Sectors: Are Chinese Imports to Blame? The International Journal ‘s Research of Commerce and Behavioural Science, Vol 3, Number 3.
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Ram, R. (1985). “Exports and Economic Growth: Some Additional Evidence.” Economic Development and Cultural Change, 33(2): 1055-1065
Rapetti, M., Skott, P., & Razmi, A. (2011). The real exchange rate and economic growth: Are developing countries different? Economics Department Working Paper Series. 115. Working Paper 2011-07. University of Massachusetts, Amherst.
RBZ. (2015). Assessing the impact of the real effective exchange rate on competitiveness in Zimbabwe. Economic Research Department. RBZ Working Paper Series No1.
Riddell, R. (1990). Zimbabwe's Export Revolving Fund, 1983-1989. The Journal of Modern African Studies, 28(3): 433-455.
Rogoff, K. (1996). The purchasing power parity puzzle. Journal of Economic Literature, 34(2): 647-668
Said & Dickey. (1984). Testing unit roots in autoregressive moving average models with unknown order. Biometrika, 71: 599-607.
Salvatore, D. (2013). Schaum's outline of theory and problems of econometrics. McGraw-Hill.
Sani, M.B. & salihu, A. (2020). Analysis of the relationship between exports incentives schemes and manufactured exports in Nigeria. IJCIRAS, Vol 3, Issue 2
Sentsho, T. (2002). Exports and economic growth in the mining sector in Bostwana: A cointegration analysis. Botswana Journal of Economics, 1(1), 67-78.
Shahriar, S., Qian, L., & Kea, S. (2019). Determinats of exports in China’s meat industry: A Gravity Model Analysis. Emerging Markets Finance and Trade, Volume 55, Issue 11.
Shekar, C. (2018). Impact of financial export incentives and their materiality to India’s export promotion: A study of selected export incentives schemes. International Journal of Business Management Research, 8(2), 1-11.
Sheppard, H. (2003). Rethinking tax-based incentives: Converting repeated defeats before the WTO into positive tax policy. Texas International Law Journal, 39(1).
Slevitch, L. (2011). Qualitative and Quantitative Methodologies Compared: Ontological and Epistemological Perspectives. Journal of Quality Assurance in Hospitality and Tourism.
United Nations Commodity Trade Statistics Database (UN COMTRADE). (2022). International Trade Statistics. Retrieved April 28, 2023, from https://comtrade.un.org/data/
WITS. (2022). World Integrated Trade Solution. https://wits.worldbank.org accessed on 5 April 2023.
Wood, A., & Mayer, J. (2011). “Has China de-industrialized other developing countries? Review of World Economics, Vol 147, (2), PP. 325-350.
Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. MIT press.
Barnet L. (1994). Outliers in statistical data. John Wiley & Sons.
Beno-Sani, A., & Salihu, M. (2020). Export incentive schemes and manufactured exports in Nigeria: An empirical analysis. Journal of Economic and Sustainable Development, 11(5): 27-39.
Bonga, W.G., Shenje, T.E, & Sithole, R. (2015). Export sector contribution to economic growth in Zimbabwe: A Causality Analysis. The International Journal of Business and Management, Vol 3, Issue 10.
Brixiova, Z., & Ncube, M. (2014). The real exchange rate and growth in Zimbabwe: Does the currency regime matter? IZA Discussion Paper Series No 8398.
Chand., R., Singh, R., Lal., S. (2022). Determinants of exports in a small and vulnerable economy: Fiji Islands. A disaggregated analysis. The European Journal of development research, 34:2948-2969.
Cobb, C.W. & Douglass, P.H. (1928). “A Theory of Production.” American Economic Review. 18:139-165.
Cowell, R. G., & Victoria-Feser, M. P. (1996). Robustness properties of some poverty indices. Economica, 63(250): 543-563.
Dickey, D.A., & Fuller, W.A. (1979). Distribution of estimators for autoregressive time series with unit root. Journal of the American Statistical Association, 74:427-431.
Dicle, I.A., & Dicle, U. (1992). Effects of government export policies on Turkish export trading companies. International Marketing Review, Volume 9, No 3.
Enders, W. (2014). Applied econometric time series. John Wiley & Sons.
Fanta, A. B., & Teshale, B. A. (2014). The effect of export trade incentives on export growth: Evidence from Ethiopia. Journal of Economics and International Business Research, 2(1): 1-14.
Feder, G. (1982). On export and economic growth. Journal of Development Economics. 12: 59-72
GoZ. (1994). GOVERNMENT OF ZIMBABWE :Zimbabwe National Export Strategy. Harare: Government Printers.
GoZ. (2021). GOVERNMENT OF ZIMBABWE: Press statement by the Minister of Finance and Economic Development on the National Budget Strategy Paper for 2022. Retrieved from https://www.zimtreasury.gov.zw/
Greene, W. H. (2011). Econometric analysis. Pearson Education India.
Gujarati, D. N., & Porter, D. C. (2010). Basic econometrics. McGraw-Hill Irwin.
Hazvina, F. (2021). An Analyis of the Impact of Chinese Competition on Zimbabwe’s Manufacturing Exports in Third Markets.
Im, K.S., Pesaran, H.M., & Shin, Y (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 11: 57-74
Johansen, S. (1988). “Statistical Analysis of Cointegration Vectors.” Journal of Economics Dynamics and Control, 12:231-254.
Khobai, H., Mbiakop, W.D., & Fani, D.C.R. (2023). Response of Agriculture Production to Change of Foreign Direct Investment and Public Agriculture Expenditure in South Africa: A Monte Carlo Simulation Analysis. International Journal of Economic and Financial Issues, 13(6), 1-7.
Koch, M., & Fessler, P. (2020). The Leontief Paradox: Evidence from a panel VAR. Empirical Economics, 58(6), 2695-2723.
Ledyaeva, S. (2017). Export subsidies and export performance: Evidence from firm-level data. Journal of Comparative Economics, 45(4): 702-722.
Levin, A., Lin, C.F., & Chu, C.S. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics, 108(1): 1-24
Maddala, G.S., & Kim, I.M. (1998). Unit roots, cointegration and structural change. Oxford University Press, Oxford, U.K.
Mankiw, N.G., Romer, D., & Weil, D.W. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107 (May): 407-437.
Medina-Smith, E.J. (2001). Export-led growth in Costa Rica: An empirical analysis for 1950-1997. CEPAL Review, (74), 115-129.
Mugumisi, N. (2014). Sectorial Deindustrialisation of Zimbabwe’s Texttiles and Clothing Sectors: Are Chinese Imports to Blame? The International Journal ‘s Research of Commerce and Behavioural Science, Vol 3, Number 3.
Mutuku, C., Sirengo, M., & Omar, A. (2021). Effects of tax incentives and firm traits on Kenyan exports: A two-stage modeling approach. Journal of International Trade Law and Policy, 20(1): 45-65.
Mzumara, M. (2011). Was Zimbabwe competitive in international trade 2000-2009? International Journal of Economic Research, 2(5): 195-216.
NATIONAL DEVELOPMENT STRATEGY 1 (NDS1). (2021). Export Market Development Expenditure. Retrieved April 28, 2023, from https://www.zimtreasury.gov.zw/national-development-strategy-1-2021-2025/
Ndlela, D. (2011). Zimbabwe’s Hyperinflation Episode: A Cautionary Tale. IMF Working Papers, 11(12): 1-34.
Ram, R. (1985). “Exports and Economic Growth: Some Additional Evidence.” Economic Development and Cultural Change, 33(2): 1055-1065
Rapetti, M., Skott, P., & Razmi, A. (2011). The real exchange rate and economic growth: Are developing countries different? Economics Department Working Paper Series. 115. Working Paper 2011-07. University of Massachusetts, Amherst.
RBZ. (2015). Assessing the impact of the real effective exchange rate on competitiveness in Zimbabwe. Economic Research Department. RBZ Working Paper Series No1.
Riddell, R. (1990). Zimbabwe's Export Revolving Fund, 1983-1989. The Journal of Modern African Studies, 28(3): 433-455.
Rogoff, K. (1996). The purchasing power parity puzzle. Journal of Economic Literature, 34(2): 647-668
Said & Dickey. (1984). Testing unit roots in autoregressive moving average models with unknown order. Biometrika, 71: 599-607.
Salvatore, D. (2013). Schaum's outline of theory and problems of econometrics. McGraw-Hill.
Sani, M.B. & salihu, A. (2020). Analysis of the relationship between exports incentives schemes and manufactured exports in Nigeria. IJCIRAS, Vol 3, Issue 2
Sentsho, T. (2002). Exports and economic growth in the mining sector in Bostwana: A cointegration analysis. Botswana Journal of Economics, 1(1), 67-78.
Shahriar, S., Qian, L., & Kea, S. (2019). Determinats of exports in China’s meat industry: A Gravity Model Analysis. Emerging Markets Finance and Trade, Volume 55, Issue 11.
Shekar, C. (2018). Impact of financial export incentives and their materiality to India’s export promotion: A study of selected export incentives schemes. International Journal of Business Management Research, 8(2), 1-11.
Sheppard, H. (2003). Rethinking tax-based incentives: Converting repeated defeats before the WTO into positive tax policy. Texas International Law Journal, 39(1).
Slevitch, L. (2011). Qualitative and Quantitative Methodologies Compared: Ontological and Epistemological Perspectives. Journal of Quality Assurance in Hospitality and Tourism.
United Nations Commodity Trade Statistics Database (UN COMTRADE). (2022). International Trade Statistics. Retrieved April 28, 2023, from https://comtrade.un.org/data/
WITS. (2022). World Integrated Trade Solution. https://wits.worldbank.org accessed on 5 April 2023.
Wood, A., & Mayer, J. (2011). “Has China de-industrialized other developing countries? Review of World Economics, Vol 147, (2), PP. 325-350.
Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. MIT press.