This paper advances understanding of the relationship between tax policy and productivity, taking advantage of unique data from the Dominican Republic to document a significant negative impact of tax regulations on total factor productivity (TFP). It begins by estimating productivity using...

We show that, in many countries, tax compliance is volatile and markedly responds to fiscal policy. To explore the consequence of this novel stylized fact, we build a model of sovereign debt with limited commitment and imperfect tax enforcement. Fiscal policy persistently affects the size of the...