IDEAS home Printed from https://ideas.repec.org/a/rfa/aefjnl/v9y2022i1p54-67.html
   My bibliography  Save this article

Heterogeneous Effects of Financial Development on Tax Revenues: Accounting for Institutional Quality in Sub-Saharan Africa

Author

Listed:
  • Sieni Toussaint. OULAI

Abstract

Several studies have shown that financial development improves efforts to increase the tax base and tax revenue through different channels. This paper analyzes the effect of financial development on tax revenue conditional on institutional quality for a panel of developing countries over the period 1990-2019. Using a threshold approach, the results indicate that the influence of financial development on non-cash tax receipts is not monotonic and is sensitive to level of institutions. Financial development improves the tax base and tax revenue when the quality of institutions is better. The results point out as well heterogeneousness across countries and over the years counts. Estimates with financial market index confirm the evidence that countries that benefit most from increased tax revenues are those that improve their institutional quality.

Suggested Citation

  • Sieni Toussaint. OULAI, 2022. "Heterogeneous Effects of Financial Development on Tax Revenues: Accounting for Institutional Quality in Sub-Saharan Africa," Applied Economics and Finance, Redfame publishing, vol. 9(1), pages 54-67, December.
    • Handle: RePEc:rfa:aefjnl:v:9:y:2022:i:1:p:54-67
    as

    Download full text from publisher

    File URL: https://redfame.com/journal/index.php/aef/article/download/5468/5668
    Download Restriction: no
    File URL: https://redfame.com/journal/index.php/aef/article/view/5468
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fouquau, Julien & Hurlin, Christophe & Rabaud, Isabelle, 2008. "The Feldstein-Horioka puzzle: A panel smooth transition regression approach," Economic Modelling, Elsevier, vol. 25(2), pages 284-299, March.
    2. Capasso, Salvatore & Jappelli, Tullio, 2013. "Financial development and the underground economy," Journal of Development Economics, Elsevier, vol. 101(C), pages 167-178.
    3. Bittencourt, Manoel & Gupta, Rangan & Stander, Lardo, 2014. "Tax evasion, financial development and inflation: Theory and empirical evidence," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 194-208.
    4. repec:idq:ictduk:10250 is not listed on IDEAS
    5. Bojan Ilievski, 2015. "Stock Markets and Tax Revenue," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 5(3), pages 1-1.
    6. Guo, Jang-Ting & Hung, Fu-Sheng, 2020. "Tax evasion and financial development under asymmetric information in credit markets," Journal of Development Economics, Elsevier, vol. 145(C).
    7. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    8. 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.
    9. Fabrizio Carmignani, 2003. "Political Instability, Uncertainty and Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 1-54, February.
    10. John Bosco Nnyanzi & John Bbale & Richard Sendi, 2018. "Financial Development and Tax Revenue: How Catalytic Are Political Development and Corruption?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(8), pages 1-92, August.
    11. repec:idq:ictduk:12791 is not listed on IDEAS
    12. Rodrik, Dani, 1992. "Political economy and development policy," European Economic Review, Elsevier, vol. 36(2-3), pages 329-336, April.
    13. Ms. Junko Koeda & Ms. Era Dabla-Norris, 2008. "Informality and Bank Credit: Evidence from Firm-Level Data," IMF Working Papers 2008/094, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. Kim, Dong-Hyeon & Wu, Yi-Chen & Lin, Shu-Chin, 2018. "Heterogeneity in the effects of government size and governance on economic growth," Economic Modelling, Elsevier, vol. 68(C), pages 205-216.
    4. Salvatore Capasso & Franziska Ohnsorge & Shu Yu, 2022. "Informality and financial development: A literature review," Manchester School, University of Manchester, vol. 90(5), pages 587-608, September.
    5. Tolga Omay & Reneé Eyden & Rangan Gupta, 2018. "Inflation–growth nexus: evidence from a pooled CCE multiple-regime panel smooth transition model," Empirical Economics, Springer, vol. 54(3), pages 913-944, May.
    6. 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, vol. 25(3), pages 468-498.
    7. Ahamada, Ibrahim & Coulibaly, Dramane, 2011. "How does financial development influence the impact of remittances on growth volatility?," Economic Modelling, Elsevier, vol. 28(6), pages 2748-2760.
    8. Maria Antoinette Silgoner & Jesús Crespo-Cuaresma & Gerhard Reitschuler, 2003. "The Fiscal Smile: The Effectiveness and Limits of Fiscal Stabilizers," IMF Working Papers 2003/182, International Monetary Fund.
    9. Rangan Gupta & Lardo Stander & Andrea Vaona, 2023. "Openness and growth: Is the relationship non‐linear?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3071-3099, July.
    10. Yilmaz Bayar & Omer Faruk Ozturk, 2016. "Financial Development and Shadow Economy in European Union Transition Economies," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 14(2 (Summer), pages 157-173.
    11. 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.
    12. Wang, Jun-Zhuo & Feng, Gen-Fu & Chang, Chun-Ping, 2024. "How does political instability affect renewable energy innovation?," Renewable Energy, Elsevier, vol. 230(C).
    13. Cristina Jude & Gregory Levieuge, 2017. "Growth Effect of Foreign Direct Investment in Developing Economies: The Role of Institutional Quality," The World Economy, Wiley Blackwell, vol. 40(4), pages 715-742, April.
    14. Shiu-Wan Hung & Chiao-Ming Li & Ming-Yi Shen, 2018. "Regional analysis of the relationship between CO 2 emissions and financial development," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 41(1/2/3/4), pages 2-13.
    15. Ibarra, Raul & Trupkin, Danilo R., 2016. "Reexamining the relationship between inflation and growth: Do institutions matter in developing countries?," Economic Modelling, Elsevier, vol. 52(PB), pages 332-351.
    16. Phiri, Andrew, 2019. "The Feldstein-Horioka Puzzle and the Global Financial Crisis: Evidence from South Africa using Asymmetric Cointegration Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 72(2), pages 139-170.
    17. Chiarini Bruno & Ferrara Maria & Marzano Elisabetta, 2024. "Noncompliant behaviors in general equilibrium: A survey," Journal of Economic Surveys, Wiley Blackwell, vol. 38(3), pages 931-955, July.
    18. Chakroun, Mohamed, 2009. "Health care expenditure and GDP: An international panel smooth transition approach," MPRA Paper 14322, University Library of Munich, Germany.
    19. Ben Lahouel, Béchir & Bruna, Maria-Giuseppina & Ben Zaied, Younes, 2020. "The curvilinear relationship between environmental performance and financial performance: An investigation of listed french firms using panel smooth transition model," Finance Research Letters, Elsevier, vol. 35(C).
    20. Harb, Nermeen & Hall, Stephen G., 2019. "Does foreign aid play a role in the maintenance of economic growth? A non-linear analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 73(C), pages 192-204.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    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:rfa:aefjnl:v:9:y:2022:i:1:p:54-67. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Redfame publishing (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.