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Remittances and public finances: Evidence from oil-price shocks

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  • Asatryan, Zareh
  • Bittschi, Benjamin
  • Doerrenberg, Philipp

Abstract

We study the effect of inflowing remittances - a major source of capital for many countries - on tax-revenues and tax-policy. Instrumenting remittances with changes in the oil-price interacted with a country's distance to oil-producing countries, we find that remittances have a large positive effect on VAT revenues but no effect on income-tax revenues. This suggests that remittances often escape the income tax but can be taxed via consumption. We further show that tax policy is responsive to shocks in incoming remittances: remittances make the adoption of VAT-systems more likely, and they lead to lower VAT-rates and higher income-tax rates.

Suggested Citation

  • Asatryan, Zareh & Bittschi, Benjamin & Doerrenberg, Philipp, 2016. "Remittances and public finances: Evidence from oil-price shocks," ZEW Discussion Papers 16-022, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:16022
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    Cited by:

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    2. Slivko, Olga, 2018. ""Brain gain" on Wikipedia: Immigrants return knowledge home," ZEW Discussion Papers 18-008, ZEW - Leibniz Centre for European Economic Research.
    3. Yuanyuan Gu & Jhorland Ayala-García, 2022. "Emigration and Tax Revenue," Documentos de trabajo sobre Economía Regional y Urbana 312, Banco de la Republica de Colombia.
    4. Pamela E. Ofori & Daryna Grechyna, 2021. "Remittances, Natural Resource Rent and Economic Growth in Sub-Saharan Africa," Working Papers 21/056, European Xtramile Centre of African Studies (EXCAS).
    5. Canh Thien Dang & Trudy Owens, 2017. "What motivates Ugandan NGOs to diversify: Risk reduction or private gain?," Discussion Papers 2017-11, University of Nottingham, CREDIT.
    6. Hannes Warnecke-Berger, 2022. "The financialization of remittances and the individualization of development: A new power geometry of global development," Environment and Planning A, , vol. 54(4), pages 702-721, June.
    7. Borchert, Kathrin & Hirth, Matthias & Kummer, Michael E. & Laitenberger, Ulrich & Slivko, Olga & Viete, Steffen, 2018. "Unemployment and online labor," ZEW Discussion Papers 18-023, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Remittances; Tax revenue; Tax policy; Value added tax; Personal income tax; Migration; Development;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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