Taxation, ICT and export of manufacturing firms in developing countries

This paper aims to assess the effect of taxation and information and communication technology (ICT) on firms’ exports. We use World Bank Enterprise Survey data on manufacturing firms in 113 developing countries over the period 2008–2019. Probit and tobit models with instrumental variables are used to estimate the extensive and intensive margin of exports, respectively. The results show that ICT mitigates the detrimental effect of tax obstacles on export propensity and intensity. Moreover, among small and medium enterprises, basic digitalization relaxes fixed compliance costs, boosting entry, while complementarities overturn entry penalties for large firms, and intensity effects remain small for both. In addition, our findings indicate that interactions are adverse in both low income countries and lower-middle-income countries but positive in upper middle income countries.