IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Does Aid Hinder Tax Efforts? More Evidence

  • José Antonio Alonso
  • Carlos Garcimartín

During recent years, new doubts about the effectiveness of international aid have emerged. One of the arguments employed to justify this sceptical view is that aid can hinder tax effort in developing countries. Nevertheless, empirical research on the aid-tax nexus is inconclusive and it shows some shortcomings in the tax database employed and in the variables considered in the estimation. The main goal of this article is to overcome these shortcomings. The main results are twofold: i) income distribution is a crucial determinant of tax revenues; and ii) once income distribution is taken into account, aid shows no significant impact on tax revenue; not even when we control for institutional quality.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by University of Nottingham, CREDIT in its series Discussion Papers with number 11/04.

in new window

Date of creation:
Date of revision:
Handle: RePEc:not:notcre:11/04
Contact details of provider: Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
Phone: (44) 0115 951 5620
Fax: (0115) 951 4159
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. 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.
  2. Edward L. Glaeser & Andrei Shleifer, 2001. "The Rise of the Regulatory State," NBER Working Papers 8650, National Bureau of Economic Research, Inc.
  3. William Easterly & Ross Levine, 2002. "Tropics, Germs, and Crops: How Endowments Influence Economic Development," Working Papers 15, Center for Global Development.
  4. Thandika Mkandawire, 2010. "On Tax Efforts and Colonial Heritage in Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 46(10), pages 1647-1669.
  5. Alberto Chong & Luisa Zanforlin, 2000. "Law tradition and institutional quality: some empirical evidence," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(8), pages 1057-1068.
  6. Gang, Ira N. & Ali Khan, Haider, 1990. "Foreign aid, taxes, and public investment," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 355-369, November.
  7. Sachs, Jeffrey D & Warner, Andrew M, 1997. "Sources of Slow Growth in African Economies," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 335-76, October.
  8. Simeon Djankov & José Garcia Montalvo & Marta Reynal-Querol, 2005. "The curse of aid," Economics Working Papers 870, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  10. Mark McGillivray & Oliver Morrissey, 2000. "Aid fungibility in Assessing Aid: red herring or true concern?," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 413-428.
  11. Rauch, James E. & Evans, Peter B., 2000. "Bureaucratic structure and bureaucratic performance in less developed countries," Journal of Public Economics, Elsevier, vol. 75(1), pages 49-71, January.
  12. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  13. Cashel-Cordo, Peter & Craig, Steven G., 1990. "The public sector impact of international resource transfers," Journal of Development Economics, Elsevier, vol. 32(1), pages 17-42, January.
  14. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  15. Douglass C. North, 2005. "Introduction to Understanding the Process of Economic Change
    [Understanding the Process of Economic Change]
    ," Introductory Chapters, Princeton University Press.
  16. Stanley L. Engerman & Kenneth Lee Sokoloff, 2002. "Factor Endowments, Inequality, and Paths of Development among New World Economies," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, August.
  17. Stanley L. Engerman & Kenneth L. Sokoloff, 2005. "Colonialism, Inequality, and Long-Run Paths of Development," NBER Working Papers 11057, National Bureau of Economic Research, Inc.
  18. Alesina, Alberto, et al, 2003. " Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-94, June.
  19. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, 03.
  20. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  21. Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
  22. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," NBER Working Papers 6849, National Bureau of Economic Research, Inc.
  23. George Mavrotas & Bazoumana Ouattara, 2006. "Aid Disaggregation and the Public Sector in Aid-Recipient Economies: Some Evidence from Cote D'Ivoire," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 434-451, 08.
  24. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
  25. Glaeser, Edward L. & Saks, Raven E., 2006. "Corruption in America," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1053-1072, August.
  26. Ouattara, B., 2006. "Foreign aid and government fiscal behaviour in developing countries: Panel data evidence," Economic Modelling, Elsevier, vol. 23(3), pages 506-514, May.
  27. Leuthold, Jane H., 1991. "Tax shares in developing economies A panel study," Journal of Development Economics, Elsevier, vol. 35(1), pages 173-185, January.
  28. Ira N. Gang & Haider Ali Khan, 1998. "Foreign Aid and Fiscal Behavior in a Bounded Rathionality Model: Different Policy Regimes," Departmental Working Papers 199812, Rutgers University, Department of Economics.
  29. Kent P. Kimbrough, 1986. "Foreign Aid and Optimal Fiscal Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 19(1), pages 35-61, February.
  30. José Antonio Alonso & Carlos Garcimartín, 2013. "The Determinants Of Institutional Quality. More On The Debate," Journal of International Development, John Wiley & Sons, Ltd., vol. 25(2), pages 206-226, 03.
  31. Osei, Robert & Morrissey, Oliver & Lloyd, Tim, 2005. "The Fiscal Effects of Aid in Ghana," Working Paper Series RP2005/61, World Institute for Development Economic Research (UNU-WIDER).
  32. Varsakelis, Nikos C., 2006. "Education, political institutions and innovative activity: A cross-country empirical investigation," Research Policy, Elsevier, vol. 35(7), pages 1083-1090, September.
  33. Alexander Pivovarsky & Benedict J. Clements & Sanjeev Gupta & Erwin Tiongson, 2003. "Foreign Aid and Revenue Response: Does the Composition of Aid Matter?," IMF Working Papers 03/176, International Monetary Fund.
  34. Joweria M. Teera & John Hudson, 2004. "Tax performance: a comparative study," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(6), pages 785-802.
  35. White, Howard, 1994. "Foreign aid, taxes and public investment: A further comment," Journal of Development Economics, Elsevier, vol. 45(1), pages 155-163, October.
  36. Stephen Knack & Omar Azfar, 2003. "Trade intensity, country size and corruption," Economics of Governance, Springer, vol. 4(1), pages 1-18, 04.
  37. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," Harvard Institute of Economic Research Working Papers 1856, Harvard - Institute of Economic Research.
  38. repec:ttp:itpwps:0411 is not listed on IDEAS
  39. Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-45, June.
  40. Alonso, José Antonio, 2007. "Inequality, institutions and progress: a debate between history and the present," Revista CEPAL, United Nations Economic Commission for Latin America and the Caribbean (ECLAC), December.
  41. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:not:notcre:11/04. 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: (Hilary Hughes)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.