IDEAS home Printed from https://ideas.repec.org/a/kap/itaxpf/v23y2016i3d10.1007_s10797-015-9379-7.html
   My bibliography  Save this article

Does conditionality in IMF-supported programs promote revenue reform?

Author

Listed:
  • Ernesto Crivelli

    () (International Monetary Fund)

  • Sanjeev Gupta

    () (International Monetary Fund)

Abstract

Abstract This paper studies whether revenue conditionality in Fund programs had any impact on the revenue performance of 126 low- and middle-income countries during 1993–2013. The results indicate that such conditionality had a positive impact on tax revenue, with strongest improvement felt on taxes on goods and services, including the VAT. Revenue conditionality matters more for low-income countries, particularly those where revenue ratios are below the group average. Moreover, revenue conditionality appears to be more effective when targeted to a specific tax. These results hold after controlling for potential endogeneity, sample selection bias, and when revenues are adjusted for economic cycle.

Suggested Citation

  • Ernesto Crivelli & Sanjeev Gupta, 2016. "Does conditionality in IMF-supported programs promote revenue reform?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(3), pages 550-579, June.
  • Handle: RePEc:kap:itaxpf:v:23:y:2016:i:3:d:10.1007_s10797-015-9379-7
    DOI: 10.1007/s10797-015-9379-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10797-015-9379-7
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bird, Graham, 1996. "Borrowing from the IMF: The policy implications of recent empirical research," World Development, Elsevier, vol. 24(11), pages 1753-1760, November.
    2. Axel Dreher, 2009. "IMF conditionality: theory and evidence," Public Choice, Springer, vol. 141(1), pages 233-267, October.
    3. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
    4. Antonio Fatás & Ilian Mihov, 2003. "The Case for Restricting Fiscal Policy Discretion," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1419-1447.
    5. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    6. Jorra, Markus, 2012. "The effect of IMF lending on the probability of sovereign debt crises," Journal of International Money and Finance, Elsevier, vol. 31(4), pages 709-725.
    7. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    8. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
    9. Zee, Howell H. & Stotsky, Janet G. & Ley, Eduardo, 2002. "Tax Incentives for Business Investment: A Primer for Policy Makers in Developing Countries," World Development, Elsevier, vol. 30(9), pages 1497-1516, September.
    10. 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.
    11. Martin Steinwand & Randall Stone, 2008. "The International Monetary Fund: A review of the recent evidence," The Review of International Organizations, Springer, vol. 3(2), pages 123-149, June.
    12. Keen, Michael & Lockwood, Ben, 2010. "The value added tax: Its causes and consequences," Journal of Development Economics, Elsevier, vol. 92(2), pages 138-151, July.
    13. Conway, Patrick, 1994. "IMF lending programs: Participation and impact," Journal of Development Economics, Elsevier, vol. 45(2), pages 365-391, December.
    14. Christoph Moser & Jan-Egbert Sturm, 2011. "Explaining IMF lending decisions after the Cold War," The Review of International Organizations, Springer, vol. 6(3), pages 307-340, September.
    15. Evrensel, Ayse Y., 2002. "Effectiveness of IMF-supported stabilization programs in developing countries," Journal of International Money and Finance, Elsevier, vol. 21(5), pages 565-587, October.
    16. Fatas, Antonio & Mihov, Ilian, 2006. "The macroeconomic effects of fiscal rules in the US states," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 101-117, January.
    17. Kunčič, Aljaž, 2014. "Institutional quality dataset," Journal of Institutional Economics, Cambridge University Press, vol. 10(01), pages 135-161, March.
    18. Ruben Atoyan & Patrick Conway, 2006. "Evaluating the impact of IMF programs: A comparison of matching and instrumental-variable estimators," The Review of International Organizations, Springer, vol. 1(2), pages 99-124, June.
    19. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    20. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    21. Keisuke Hirano & Guido W. Imbens & Geert Ridder, 2003. "Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score," Econometrica, Econometric Society, vol. 71(4), pages 1161-1189, July.
    22. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    23. Dreher, Axel, 2006. "IMF and economic growth: The effects of programs, loans, and compliance with conditionality," World Development, Elsevier, vol. 34(5), pages 769-788, May.
    24. Graham Bird, 2007. "The Imf: A Bird'S Eye View Of Its Role And Operations," Journal of Economic Surveys, Wiley Blackwell, vol. 21(4), pages 683-745, September.
    25. Lledó, Victor & Poplawski-Ribeiro, Marcos, 2013. "Fiscal Policy Implementation in Sub-Saharan Africa," World Development, Elsevier, vol. 46(C), pages 79-91.
    26. Wei, Shang-Jin & Zhang, Zhiwei, 2010. "Do external interventions work? The case of trade reform conditions in IMF supported programs," Journal of Development Economics, Elsevier, vol. 92(1), pages 71-81, May.
    27. Cragg, John G. & Donald, Stephen G., 1993. "Testing Identifiability and Specification in Instrumental Variable Models," Econometric Theory, Cambridge University Press, vol. 9(02), pages 222-240, April.
    28. Jens Matthias Arnold & Bert Brys & Christopher Heady & Åsa Johansson & Cyrille Schwellnus & Laura Vartia, 2011. "Tax Policy for Economic Recovery and Growth," Economic Journal, Royal Economic Society, vol. 121(550), pages 59-80, February.
    29. Samuel Bazzi & Michael A. Clemens, 2013. "Blunt Instruments: Avoiding Common Pitfalls in Identifying the Causes of Economic Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 152-186, April.
    30. Przeworski, Adam & Vreeland, James Raymond, 2000. "The effect of IMF programs on economic growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 385-421, August.
    31. Dicks-Mireaux, Louis & Mecagni, Mauro & Schadler, Susan, 2000. "Evaluating the effect of IMF lending to low-income countries," Journal of Development Economics, Elsevier, vol. 61(2), pages 495-526, April.
    32. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2014. "Democracy Does Cause Growth," NBER Working Papers 20004, National Bureau of Economic Research, Inc.
    33. Barro, Robert J. & Lee, Jong-Wha, 2005. "IMF programs: Who is chosen and what are the effects?," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1245-1269, October.
    34. Auriol, Emmanuelle & Warlters, Michael, 2005. "Taxation base in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 625-646, April.
    35. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
    36. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
    37. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    38. Crivelli, Ernesto & Gupta, Sanjeev, 2014. "Resource blessing, revenue curse? Domestic revenue effort in resource-rich countries," European Journal of Political Economy, Elsevier, vol. 35(C), pages 88-101.
    39. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
    40. Carola Pessino & Ricardo Fenochietto, 2010. "Determining countries’ tax effort," Hacienda Pública Española, IEF, vol. 195(4), pages 65-87, december.
    41. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    42. Bertrand LAPORTE & Gérard CHAMBAS & Jean-François BRUN, 2010. "IMF programs and tax effort What role for institutions in Africa?," Working Papers 201033, CERDI.
    43. Sebastian Edwards & Julio Santaella, 1993. "Devaluation Controversies in the Developing Countries: Lessons from the Bretton Woods Era," NBER Chapters,in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 405-460 National Bureau of Economic Research, Inc.
    44. Axel Dreher & Roland Vaubel, 2004. "Do IMF and IBRD Cause Moral Hazard and Political Business Cycles? Evidence from Panel Data," Open Economies Review, Springer, vol. 15(1), pages 5-22, January.
    45. Easterly, William, 2005. "What did structural adjustment adjust?: The association of policies and growth with repeated IMF and World Bank adjustment loans," Journal of Development Economics, Elsevier, vol. 76(1), pages 1-22, February.
    46. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
    47. Rabah Arezki & Marc G Quintyn & Frederik G Toscani, 2012. "Structural Reforms, IMF Programs and Capacity Building; An Empirical Investigation," IMF Working Papers 12/232, International Monetary Fund.
    48. Dreher, Axel & Jensen, Nathan M, 2007. "Independent Actor or Agent? An Empirical Analysis of the Impact of U.S. Interests on International Monetary Fund Conditions," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 105-124, February.
    49. Benedict Clements & Sanjeev Gupta & Masahiro Nozaki, 2013. "What happens to social spending in IMF-supported programmes?," Applied Economics, Taylor & Francis Journals, vol. 45(28), pages 4022-4033, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roel Dom, 2017. "Semi-Autonomous Revenue Authorities in Sub-Saharan Africa: Silver Bullet or White Elephant," Discussion Papers 2017-01, University of Nottingham, CREDIT.
    2. Guimarães, Bernardo de Vasconcellos & Ladeira, Carlos Eduardo de Almeida, 2015. "The determinants of IMF fiscal conditionalities: economics or politics?," Textos para discussão 391, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    3. Djedje Hermann YOHOU & Michaël GOUJON, 2017. "Reassessing Tax Effort in Developing Countries: a Proposal of a Vulnerability-Adjusted Tax Effort Index (VATEI)," Working Papers P186, FERDI.
    4. repec:taf:jdevst:v:53:y:2017:i:7:p:1057-1074 is not listed on IDEAS
    5. Stubbs, Thomas & Kentikelenis, Alexander & Stuckler, David & McKee, Martin & King, Lawrence, 2017. "The impact of IMF conditionality on government health expenditure: A cross-national analysis of 16 West African nations," Social Science & Medicine, Elsevier, vol. 174(C), pages 220-227.
    6. Abrams M.E. Tagem, 2017. "The economics and politics of foreign aid and domestic revenue," WIDER Working Paper Series 180, World Institute for Development Economic Research (UNU-WIDER).
    7. Irina Andone & Beatrice D. Scheubel, 2017. "Memorable Encounters? Own and Neighbours' Experience with IMF Conditionality and IMF Stigma," CESifo Working Paper Series 6399, CESifo Group Munich.
    8. Ernesto Crivelli & Sanjeev Gupta, 2017. "Does Conditionality Mitigate the Potential Negative Effect of Aid on Revenues?," Journal of Development Studies, Taylor & Francis Journals, vol. 53(7), pages 1057-1074, July.
    9. repec:taf:pocoec:v:28:y:2016:i:4:p:468-486 is not listed on IDEAS

    More about this item

    Keywords

    Tax revenue reform; Structural conditionality; IMF;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:23:y:2016:i:3:d:10.1007_s10797-015-9379-7. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.