Two – Stage Least Square Estimation of Federal Government Collected Taxes and Economic Growth in Nigeria
- January 9, 2020
- Posted by: RSIS
- Categories: Accounting, IJRSI
International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue XII, December 2019 | ISSN 2321–2705
Leonard C. Uguru, Busari Ganiyu Adeniran
Department of Accountancy, Ebonyi State University, Abakaliki, Nigeria
Abstract – The paper investigates the effect of exogeneity and multicollinearity in the estimation of federal government collected taxes and economic growth. Ordinary Least Square model of time series data are often associated with the above stated problem, of which previous attempts to model have failed to investigate. This study thus, explored these phenomena within the context of fitting an economic growth model via a Two-Stage Least Square technique (TSLS) by considering only federal government collected tax instruments as predictors. The validation of the model parameters were ascertained using t-test, F-test, Durbin Watson, R-squared, Adjusted R-squared and Standard error test while variance inflation factor and tolerance level were employed to estimate the degree of multicollinearity. The adopted validity statistic showed that the TSLS model was properly specified with the introduction of specified instrumental variables. The findings from the fitted model revealed that on the aggregates, taxation has contributed positively to the economic growth of Nigeria for the periods under review. In addition, F-statistic of 10.36757 with P-value of 0.000 shows that the overall TSLS regression model is statistically significant and free from the aforementioned problem. The research thus recommends a TSLS technique for the appropriate and error free modeling of economic growth whenever time series data is in used.
Keywords: Federal Government, Taxes, Economic Growth, Two-Stage Least Square, Nigeria.
I. INTRODUCTION
Individuals, groups, businesses and corporate bodies are caused to pay a certain amount or percentage of income as levy by constituted authorities for the provision of public goods, security, development and social benefit of the people. This levy is called tax. Taxes have come into reality of being from ancient time, without a certain mention of when precisely it developed, but the origin of tax can be traced to the ancient cities of Egypt, Greek and Rome (Uguru (2017); Abomaye-Nimenibo, Micheal & Friday, 2018). The major duty of every leader the world over is to provide safety, liberty, well-being, and comfort for its citizens (Ofoegbu, Akwu & Oliver, 2016). Section 16(1b) of the 1999 Constitution of the Federal Republic of Nigeria states that “the government has the responsibility of ensuring the maximum welfare, freedom and happiness of its citizens”.
