IDEAS home Printed from https://ideas.repec.org/a/oup/jafrec/v25y2016i3p468-498..html
   My bibliography  Save this article

Heterogeneous Aid Effects on Tax Revenues: Accounting for Government Stability in WAEMU Countries

Author

Listed:
  • Hermann D. Yohou
  • Michaël Goujon
  • Wautabouna Ouattara

Abstract

Using a panel threshold model, we examine the heterogeneous effects of foreign aid on tax revenue due to government stability in the West African Economic and Monetary Union countries over the period 1986–2010. Panel Smooth Threshold Regressions indicate the existence of strong threshold effects in the aid–tax relationship depending on the level of government stability. They also indicate that the effect of aid on tax revenue is gradual and varies across countries according to the level of government stability. We find that aid directly reduces tax revenues but for higher levels of government stability it enhances tax performance. We provide estimates of country time-varying coefficients of aid effect. We find on average a positive impact of aid. However, the size of this impact is very small, suggesting that there is still much to do at the institutional level to improve the effectiveness of aid for tax performance in WAEMU countries.

Suggested Citation

  • Hermann D. Yohou & Michaël Goujon & Wautabouna Ouattara, 2016. "Heterogeneous Aid Effects on Tax Revenues: Accounting for Government Stability in WAEMU Countries," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 25(3), pages 468-498.
  • Handle: RePEc:oup:jafrec:v:25:y:2016:i:3:p:468-498.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jae/ejw003
    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. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    2. Cristina JUDE & Grégory LEVIEUGE, 2013. "Growth Effect of FDI in Developing Economies: the Role of Institutional Quality," LEO Working Papers / DR LEO 2251, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    3. Paul Clist & Oliver Morrissey, 2011. "Aid and tax revenue: Signs of a positive effect since the 1980s," Journal of International Development, John Wiley & Sons, Ltd., vol. 23(2), pages 165-180, March.
    4. 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.
    5. Gilbert Colletaz & Christophe Hurlin, 2006. "Threshold Effects in the Public Capital Productivity: an International Panel Smooth Transition Approach," Post-Print halshs-00257487, HAL.
    6. Patrick Fossat & Michel Bua, 2013. "Tax Administration Reform in the Francophone Countries of Sub-Saharan Africa," IMF Working Papers 13/173, International Monetary Fund.
    7. Prichard, Wilson & Brun, Jean-François & Morrissey, Oliver, 2013. "Donors, Aid and Taxation in Developing Countries: An overview," Working Papers 11258, Institute of Development Studies, International Centre for Tax and Development.
    8. Michael Keen & Mario Mansour, 2010. "Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation II - Corporate Taxation," Development Policy Review, Overseas Development Institute, vol. 28(5), pages 573-596, September.
    9. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 503-530.
    10. Alberto Alesina & Guido Tabellini, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 403-414.
    11. Knack, Stephen, 2009. "Sovereign rents and quality of tax policy and administration," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 359-371, September.
    12. Fabrizio Carmignani, 2003. "Political Instability, Uncertainty and Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 1-54, February.
    13. Edwards, Sebastian & Tabellini, Guido, 1991. "Explaining fiscal policies and inflation in developing countries," Journal of International Money and Finance, Elsevier, vol. 10(1, Supple), pages 16-48, March.
    14. Gilbert Colletaz & Christophe Hurlin, 2006. "Threshold Effects of the Public Capital Productivity : An International Panel Smooth Transition Approach," Working Papers halshs-00008056, HAL.
    15. Mario MANSOUR & Grégoire ROTA-GRAZIOSI, 2013. "Tax coordination, tax competition, and revenue mobilization in the west african economic and monetary union," Working Papers P81, FERDI.
    16. Bertrand LAPORTE & Gérard CHAMBAS & Jean-François BRUN, 2010. "IMF programs and tax effort What role for institutions in Africa?," Working Papers 201033, CERDI.
    17. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
    18. Bird, Richard M. & Martinez-Vazquez, Jorge & Torgler, Benno, 2008. "Tax Effort in Developing Countries and High Income Countries: The Impact of Corruption, Voice and Accountability," Economic Analysis and Policy, Elsevier, vol. 38(1), pages 55-71, March.
    19. Jean-Paul Azam & Shantayanan Devarajan & Stephen A. O'Connell, 1999. "Aid dependence reconsidered," CSAE Working Paper Series 1999-05, Centre for the Study of African Economies, University of Oxford.
    20. Tanzi, Vito & Zee, Howell H., 2000. "Tax Policy for Emerging Markets: Developing Countries," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(2), pages 299-322, June.
    21. Nabamita Dutta & Peter T. Leeson & Claudia R. Williamson, 2013. "The Amplification Effect: Foreign Aid's Impact on Political Institutions," Kyklos, Wiley Blackwell, vol. 66(2), pages 208-228, May.
    22. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    23. Granger, Clive W. J. & Terasvirta, Timo, 1993. "Modelling Non-Linear Economic Relationships," OUP Catalogue, Oxford University Press, number 9780198773207.
    24. World Bank, 2014. "World Development Indicators 2014," World Bank Publications, The World Bank, number 18237, August.
    25. Michael Keen & Mario Mansour, 2010. "Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation I - Trade Reform," Development Policy Review, Overseas Development Institute, vol. 28(5), pages 553-571, September.
    26. Alexander Pivovarsky & Benedict J. Clements & Sanjeev Gupta & Erwin H Tiongson, 2003. "Foreign Aid and Revenue Response; Does the Composition of Aid Matter?," IMF Working Papers 03/176, International Monetary Fund.
    27. repec:fth:oxesaf:99-5 is not listed on IDEAS
    28. José Antonio Alonso & Carlos Garcimartín, "undated". "Does Aid Hinder Tax Efforts? More Evidence," Discussion Papers 11/04, University of Nottingham, CREDIT.
    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. repec:eee:quaeco:v:67:y:2018:i:c:p:311-325 is not listed on IDEAS
    2. 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.
    3. Maïmouna Diakite & Jean-François Brun & Souleymane Diarra & Nasser Ary Tanimoune, 2017. "The effects of tax coordination on the tax revenue mobilization in West African Economic and Monetary Union (WAEMU)," Working Papers halshs-01535104, HAL.
    4. Djedje Hermann YOHOU & Michaël GOUJON & Bertrand LAPORTE & Samuel GUERINEAU, 2016. "Is Aid Unfriendly to Tax? African Evidence of Heterogeneous Direct and Indirect Effects," Working Papers 201608, CERDI.
    5. Brun, Jean-François & Gnangnon, Sèna Kimm, 2017. "Does trade openness contribute to driving financing flows for development?," WTO Staff Working Papers ERSD-2017-06, World Trade Organization (WTO), Economic Research and Statistics Division.

    More about this item

    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
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • F35 - International Economics - - International Finance - - - Foreign Aid

    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:oup:jafrec:v:25:y:2016:i:3:p:468-498.. 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: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/csaoxuk.html .

    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.