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Fiscal Composition and Aid Effectiveness: A Political Economy Model

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  • Mosley, Paul

Abstract

In the long run tax effort, we argue, determines the effectiveness of aid, and this relationship operates simultaneously with the negative link in the opposite direction observed by Bräutigam and Knack (2004) and others. Tax effort and the ability of the state to diversify its taxation structure, we find, are significantly linked to growth and poverty indicators. The key message for policy is that a broadening of the tax structure in low-income countries is crucial in order to enable those countries to escape from the “weak-state–low-tax trap,” and to make aid effective.

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  • Mosley, Paul, 2015. "Fiscal Composition and Aid Effectiveness: A Political Economy Model," World Development, Elsevier, vol. 69(C), pages 106-115.
    • Handle: RePEc:eee:wdevel:v:69:y:2015:i:c:p:106-115
    DOI: 10.1016/j.worlddev.2013.12.020
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    2. Patrick Guillaumont & Phu Nguyen‐Van & Thi Kim Cuong Pham & Laurent Wagner, 2023. "Equal opportunity and poverty reduction: How should aid be allocated?," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 550-607, February.
    3. Paul Mosley & Abdul‐Gafaru Abdulai, 2020. "The political economy of progressive fiscal contracts in Africa and Latin America," Development Policy Review, Overseas Development Institute, vol. 38(4), pages 411-427, July.
    4. Khan, Haider A. & Dost, Ahmad Najim, 2015. "Japanese Foreign Aid, Development Expenditures and Taxation in Thailand 1960-2012:Econometric Results from a Bounded Rationality Model of Fiscal Behavior," MPRA Paper 66586, University Library of Munich, Germany.
    5. Fischer, A.M., 2016. "Aid and the symbiosis of global redistribution and development: Comparative historical lessons from two icons of development studies," ISS Working Papers - General Series 618, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    6. Pamela Lenton & Mike Masiye & Paul Mosley, 2017. "Taxpayer’s dilemma: how can ‘fiscal contracts’ work in developing countries?," Working Papers 2017004, The University of Sheffield, Department of Economics.
    7. Faheem Jehangir Khan, 2016. "The Aid Policy Network in Pakistan: An Actor-Network Analysis," PIDE-Working Papers 2016:140, Pakistan Institute of Development Economics.
    8. Armin von Schiller, 2017. "Party system institutionalization and reliance on personal income tax: Exploring the relationship using new data," WIDER Working Paper Series 032, World Institute for Development Economic Research (UNU-WIDER).
    9. Ilaski Barañano & Marta San Martín, 2015. "The Impact of Foreign Aid Linked to Infrastructure and Pollution Abatement," Review of International Economics, Wiley Blackwell, vol. 23(4), pages 667-686, September.
    10. Zhou, Kuo & Qu, Zhi & Wei, Zhixuan & Zhao, Jiyang, 2023. "Does government fiscal pressure matter for firm environmental performance? The role of environmental regulation and tax competition," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1187-1204.
    11. Sèna Kimm Gnangnon, 2022. "Financial development and tax revenue in developing countries: investigating the international trade channel," SN Business & Economics, Springer, vol. 2(1), pages 1-26, January.
    12. Francesco Burchi & Armin von Schiller & Christoph Strupat, 2020. "Social protection and revenue collection: How they can jointly contribute to strengthening social cohesion," International Social Security Review, John Wiley & Sons, vol. 73(3), pages 13-32, July.
    13. Alessandra Pelloni & Thanasis Stengos & Ilaria Tedesco, 2018. "Aid to agriculture, trade and take-off," Working Paper series 18-04, Rimini Centre for Economic Analysis.
    14. Paul Mosley & Abdul-Gafaru Abdulai, 2016. "The political economy of 'linked' progressive taxation in Africa and Latin America," WIDER Working Paper Series wp-2016-131, World Institute for Development Economic Research (UNU-WIDER).
    15. Armin von Schiller, 2017. "Party system institutionalization and reliance on personal income tax: Exploring the relationship using new data," WIDER Working Paper Series wp-2017-32, World Institute for Development Economic Research (UNU-WIDER).
    16. Galvis Ciro, Juan Camilo & Ferreira de Mendonça, Helder, 2016. "Inflation targeting and tax effort: Evidence from Colombia," MPRA Paper 90544, University Library of Munich, Germany, revised 14 Dec 2018.
    17. Gnangnon, Sèna Kimm, 2019. "Financial Development and Tax Revenue in Developing Countries: Investigating the International Trade and Economic Growth Channels," EconStor Preprints 206628, ZBW - Leibniz Information Centre for Economics.

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