Template-Type: ReDIF-Article 1.0
Author-Name: Luis Felipe Brito-Gaona
Author-Name: Emma M. Iglesias
Title:  Inversión privada, gasto público y presión tributaria en Ecuador
Abstract: Resumen:Este trabajo analiza empíricamente los
determinantes de la inversión privada en las 24 provincias de Ecuador en el
periodo 2007-2014. Dado que nuestro análisis es a nivel provincial y no podemos
usar el tipo de cambio como variable representativa del sector exterior como
hace la literatura previa, la principal novedad que proponemos es el uso de las
remesas para capturar la influencia del sector exterior ecuatoriano. Nuestros
resultados muestran evidencia a favor de tres hipótesis: (1) a corto plazo, la
presión tributaria tiene efectos significativos en la inversión privada
mientras que a largo plazo sólo el PIB y las remesas son significativas; (2) la
inversión pública tiene un efecto de crowding
out con la inversión privada en el corto plazo; (3) y que para estimular la
inversión privada, se prefiere que el gobierno sea poco intervencionista en el
corto plazo, siendo ésta la misma conclusión que en Brito-Gaona e Iglesias
(2017) para toda América Latina. Estas conclusiones son especialmente importantes
en un país como Ecuador, donde el peso del sector público es uno de los más
altos de Latinoamérica.  Abstract:<pre>We analyze empirically the determinants of private investment in the 24 provinces in Ecuador in the 2007-2014 period. Since our analysis is at the province level and we cannot use the exchange rate as the representative variable of the foreign sector as it is done in the previous literature, the main novelty that we propose is the use of remittances to capture the effect of the foreign sector in Ecuador. Ecuador is an Andean country with various characteristics typical of tropical nations, and is located in the northwestern region of South America. It is made up of four natural regions, which are called Costa (or Litoral), Sierra (or Interandina), Oriente (or Amazónica) and Galápagos (or Insular). These regions also have 24 provinces (and their respective capitals), which are Azuay, Bolívar, Cañar, Carchi, Chimborazo, Cotopaxi, El Oro, Esmeraldas, Galápagos, Guayas, Imbabura, Loja, Los Ríos, Manabí, Morona Santiago, Napo, Orellana, Pastaza, Pichincha, Santa Elena, Santo Domingo de los Tsáchilas, Sucumbíos, Tungurahua, Zamora Chinchipe. </pre><pre>First, we show the evolution of all the variables that are employed in our econometric analysis in Ecuador and also in all the provinces. Those variables are: the tax burden and the weight of the different types of taxes in total collection (income tax and the Value Added Tax –VAT-); gross domestic product (GDP), and finally public spending and private investment. We also focus on the evolution of remittances which is the novelty that our article introduces in relation to the existing literature (see Mendoza et al (1997), Caballero et al (2012) and Brito-Gaona and Iglesias (2017, 2018), where the exchange rate is used instead of remittances). As argued in Jiménez (2015), the evolution of the tax structure in Latin American countries (including Ecuador), has resulted, in most cases, in a very unequal relationship between direct and indirect taxation. In this sense, the tax policy has not only strengthened the general taxation on consumption by strengthening the VAT, but also, the income tax has been oriented to basically tax the income of legal entities and, to a much lesser extent, the income obtained by natural persons.</pre><pre>Later, in the econometric analysis, our methodology involves the use of dynamic panel data techniques due to the characteristics of the employed variables in our models and the fact that in our dataset we have a much higher number of cross section units than time series periods. We present results both in the short and the long run. Our results show evidence in favor of three hypotheses: (1) in the short run, tax burden has significant effects on private investment while in the long term only gross domestic product and remittances are statistically significant; (2) public investment has a crowding out effect with private investment in the short run; (3) and that in order to stimulate private investment,the government should have very little intervention in the short run, agreeing with the same conclusion found in Brito-Gaona and Iglesias (2017) for all countries in Latin America. </pre><pre>We show the robustness of our results by using different estimation methods and different variables to represent the foreign sector. In special, we show the robustness in relation to three aspects: (1) First, in our results we have used the Difference-GMM estimator that uses the moment conditions that come from the estimated first-differences of the error term. Another alternative estimator is System-GMM (see Arellano and Bover (1995) and Blundell and Bond (1998)) that uses the same moment conditions as Difference-GMM and also of the residual levels. We have applied the System-GMM estimator in our analysis and the results with Difference-GMM are similar and robust to this estimator change. (2) Second, in the case of Ecuador, as an oil-producing country, it would be interesting to include some variable related to oil revenues by province, since this variable can affect both explanatory variables (such as GDP) and private investment which could be overestimating the GDP ratio (see Bond and Malik (2009)). Indeed, Bernal and Argothy (2018) demonstrate how there is a strong and highly significant linear (positive) correlation between oil activity and total GDP in the two most oil-producing provinces in Ecuador (Orellana and Sucumbíos) and in a moderate way, in Pastaza and Santa Elena. Bernal and Argothy (2018) show that in the period 2007-2014, in the province of Orellana, 61% of Ecuadorian crude has been exploited and produced, in Sucumbios 31.4%, in Pastaza 6% and in Santa Elena the 0.9%. The remaining 0.7% corresponds to the province of Napo. Given that practically all the oil production in Ecuador is concentrated in two provinces, this makes it difficult to introduce a variable such as oil income as an explanatory variable representative of the 24 Ecuadorian provinces in our econometric analysis of the third section. (3) Third, since our main novelty in relation to the existing literature is the introduction of the variable “remittances” as representative of the foreign sector, a possible analysis would be to replace that variable by another variable that can have the same function and check the robustness of the results. We have obtained the series of “disbursements from international cooperation” as a possible source of financing or attraction to investment, by regions of Ecuador in the period 2007-2014. We obtain robust results both when using “remittances” or “disbursements from international cooperation”.</pre>Our results offer evidence that public spending is incapable of
reactivating private investment, especially when it is financed with tax
resources. In this way, we show evidence in favor that the position during the
last decades that some Latin American governments have maintained, in the sense
of increasing state participation in the country's economic activity and
privileging tax collection, may have detrimental effects on private investment,
at least in the short term. Furthermore, if a tax increase is to be chosen, in
this paper we show evidence that increases in consumption tax are less
detrimental to private investment than increases in income tax in the short
term. Our results also show evidence that high taxes discourage investment or
consumption demand, as in the case of regressive taxes and with which social
spending can be negatively affected. Therefore, an intervening state that
produces goods and provides services directly displaces private investment at
least in the short term. Our conclusions are especially important in a country
such as Ecuador, where the weight of the public sector is one of the largest
ones in Latin-America
Classification-JEL: R1
Keywords: Inversión Privada, Composición del gasto público, Cesión de los impuestos especiales, Remesas, Private Investment, Government Expenditure, Assigned Taxes, Remittances
Pages: 81-118
Volume: 3
Year: 2021
File-URL: http://www.revistaestudiosregionales.com/documentos/articulos/pdf-articulo-2619.pdf
File-Format: Application/pdf
Handle: RePEc:rer:articu:v:3:y:2021:p:81-118