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Aid and tax revenue: Signs of a positive effect since the 1980s

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Author Info

  • Paul Clist
  • Oliver Morrissey

Abstract

This paper addresses the effect of aid loans and grants on tax effort using data for 82 developing countries over 1970–2005. We find no robust evidence for a negative effect of aid (grants or loans) on the tax/GDP ratio, other than a contemporaneous correlation, but find some evidence that the effect of grants on tax revenue is positive (if significant) since the mid 1980s and that grants tend to increase tax revenue over the medium term. For poor aid recipients, grants are to be preferred to loans because they create no debt and have no adverse fiscal effects. Copyright (C) 2009 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jid.1656
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 23 (2011)
Issue (Month): 2 (March)
Pages: 165-180

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Handle: RePEc:wly:jintdv:v:23:y:2011:i:2:p:165-180

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Web page: http://www3.interscience.wiley.com/journal/5102/home

Related research

Keywords: aid ; grants ; loans ; tax revenue ; F35 ; O23 ;

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Cited by:
  1. Hélène Ehrhart, 2011. "Assessing the relationship between democracy and domestic taxes in developing countries," Working Papers halshs-00553607, HAL.
  2. Ehrhart, H. & Guerineau, S., 2013. "Commodity price volatility and tax revenue: Evidence from developing countries," Working papers 423, Banque de France.
  3. Samuel Guerineau & Hélène Ehrhart, 2012. "The impact of high and volatile commodity prices on public finances: Evidence from developing countries," Working Papers halshs-00659100, HAL.
  4. Samuel Guerineau & Hélène Ehrhart, 2012. "The impact of high and volatile commodity prices on public finances: Evidence from developing countries," Working Papers halshs-00659098, HAL.
  5. Dierk Herzer & Oliver Morrissey, . "The Long-Run Effect of Aid on Domestic Output," Discussion Papers 09/01, University of Nottingham, CREDIT.
  6. Knoll, Martin, 2011. "Foreign aid and revenue response: An examination of joint General Budget Support," Discussion Papers 2011/23, Free University Berlin, School of Business & Economics.
  7. Ivanyna, Maksym & von Haldenwang, Christian, 2012. "A comparative view on the tax performance of developing countries: Regional patterns, non-tax revenue and governance," Economics Discussion Papers 2012-10, Kiel Institute for the World Economy.
  8. Morrissey, Oliver, 2012. "Aid and Government Fiscal Behaviour: What Does the Evidence Say?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  9. Dora Benedek & Ernesto Crivelli & Sanjeev Gupta & Priscilla Muthoora, 2014. "Foreign Aid and Revenue: Still a Crowding-Out Effect?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(1), pages 67-96, March.
  10. Bwire, Thomas & Morrissey, Oliver & Lloyd, Tim, 2013. "A timeseries analysis of the impact of foreign aid on central government.s fiscal budget in Uganda," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  11. José Antonio Alonso & Carlos Garcimartín, . "Does Aid Hinder Tax Efforts? More Evidence," Discussion Papers 11/04, University of Nottingham, CREDIT.
  12. Oliver Morrissey, 2011. "Comment on Mosley (2010): Trust and conditionality, or can the World Bank Leopard change its spots," The Review of International Organizations, Springer, vol. 6(3), pages 453-456, September.

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