Assessing the Impact of Tax Revenue on Economic Growth: The Moderating Role of Institutional Quality and Mediating Effect of Corruption in Ghana
DOI:
https://doi.org/10.65080/ajbmss.v2i2.CM2622101032Keywords:
Tax revenue, Domestic Resource Mobilisation (DRM), institutional quality, corruption, economic growth, GhanaAbstract
Introduction: This study explores how tax revenue, institutional quality, corruption, and economic growth have complex structural relationships in Ghana. It seeks to explain the relationship between governance and the fiscal-growth nexus, and to combine moderating and mediating variables within a single framework to provide an integrated perspective on fiscal policy effectiveness in an emerging-economy setting.
Methodology: The study uses a moderated mediation model as estimated with the help of the Partial Least Squares Structural Equation Modelling (PLS-SEM) in SmartPLS 4 with annual time-series data available from 2002 to 2022 (n = 21 complete annual observations). The technique allows the direct, indirect and conditional effects in the form of the fiscal, governance, and corruption constructs to be strongly estimated, without leaving out the interdependencies between the constructs in the Ghanaian macroeconomic system.
Results: Tax revenue is positively but not significantly related to economic growth (β = 0.409, p = 0.217), so the prediction of Endogenous Growth Theory is directionally consistent with the data without being confirmed. The only statistically significant structural path is that running from tax revenue to corruption (β = 0.646, p = 0.040), supporting hypothesis H3a: periods of stronger tax mobilisation in Ghana are associated with higher measured corruption. Institutional quality carries a positive but non-significant coefficient (β = 0.517, p = 0.122).
Conclusion: The implications of the findings include the necessity of reforming governance based on the flexibility of the institutions, accountability, and administrative efficiency instead of increasing the regulatory base.
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Copyright (c) 2026 Joseph Kofi Mensah, David Kwashie Garr and David Mensah Awadzie (Author)
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