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Is Aid Unfriendly to Tax? African Evidence of Heterogeneous Direct and Indirect Effects

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  • Djedje Hermann Yohou

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Michaël Goujon

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Bertrand Laporte

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Samuel Guérineau

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

Abstract

We explore the heterogeneous effects together with the transmission channels of aid on tax revenues in 47 African countries over 1990-2011 using a panel smooth threshold regression model and two alternative tax datasets from IMF and ICTD. We find that aid enhances tax revenues with decreasing returns for a threshold of 6.3% and 23% of GNI for total taxes and non-resource taxes respectively. Aid effect varies across countries and over time, but, on average, is positive. Moreover, we evidence that aid conditions the impact of the level of development, trade, institutions and resource wealth on tax.

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  • Djedje Hermann Yohou & Michaël Goujon & Bertrand Laporte & Samuel Guérineau, 2016. "Is Aid Unfriendly to Tax? African Evidence of Heterogeneous Direct and Indirect Effects," CERDI Working papers halshs-01321620, HAL.
    • Handle: RePEc:hal:cdiwps:halshs-01321620
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    More about this item

    Keywords

    Foreign aid; Taxation; Nonlinearities; Revenues; Tax data; Africa;
    All these keywords.

    JEL classification:

    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • F35 - International Economics - - International Finance - - - Foreign Aid

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