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Does aid fragmentation affect tax revenue dynamics in developing countries?: Observations with new tax data

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  • Ali Compaoré
  • Abrams M.E. Tagem

Abstract

There exists a burgeoning empirical literature on the impact of aid fragmentation on development outcomes in aid-receiving countries, with it being widely recognized that aid fragmentation is deleterious. This paper adds to the existing literature by estimating the impact of aid fragmentation on tax revenue mobilization in developing countries. Drawing on the popular system generalized method of moments technique to counter endogeneity issues, this study focuses on a sample of 90 developing countries covering the period from 2000 to 2020.

Suggested Citation

  • Ali Compaoré & Abrams M.E. Tagem, 2022. "Does aid fragmentation affect tax revenue dynamics in developing countries?: Observations with new tax data," WIDER Working Paper Series wp-2022-99, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2022-99
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    References listed on IDEAS

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    2. Jose L. Diaz‐Sanchez & Abrams M. E. Tagem & Joana Mota, 2022. "Tax revenue effort and aid in fragile states: The case of Comoros," South African Journal of Economics, Economic Society of South Africa, vol. 90(2), pages 175-195, June.
    3. Joshua Aizenman & Yothin Jinjarak, 2009. "Globalisation and Developing Countries - a Shrinking Tax Base?," Journal of Development Studies, Taylor & Francis Journals, vol. 45(5), pages 653-671.
    4. Temple, Jonathan & Van de Sijpe, Nicolas, 2017. "Foreign aid and domestic absorption," Journal of International Economics, Elsevier, vol. 108(C), pages 431-443.
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    6. Christof Ernst & Katharina Richter & Nadine Riedel, 2014. "Corporate taxation and the quality of research and development," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(4), pages 694-719, August.
    7. Kilby, Christopher, 2011. "What Determines the Size of Aid Projects?," World Development, Elsevier, vol. 39(11), pages 1981-1994.
    8. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    9. Crivelli, Ernesto & Gupta, Sanjeev, 2014. "Resource blessing, revenue curse? Domestic revenue effort in resource-rich countries," European Journal of Political Economy, Elsevier, vol. 35(C), pages 88-101.
    10. Arnab Acharya & Ana Teresa Fuzzo de Lima & Mick Moore, 2006. "Proliferation and fragmentation: Transactions costs and the value of aid," Journal of Development Studies, Taylor & Francis Journals, vol. 42(1), pages 1-21.
    11. Urbain T. Yogo & Martine M. Ngo Njib, 2018. "Political Competition and Tax Revenues in Developing Countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 30(2), pages 302-322, March.
    12. Maruta, Admasu Asfaw & Banerjee, Rajabrata & Cavoli, Tony, 2020. "Foreign aid, institutional quality and economic growth: Evidence from the developing world," Economic Modelling, Elsevier, vol. 89(C), pages 444-463.
    13. Persson, Torsten & Besley, Tim, 2013. "Taxation and Development," CEPR Discussion Papers 9307, C.E.P.R. Discussion Papers.
    14. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    15. Oliver Morrissey, 2015. "Aid and domestic resource mobilization with a focus on Sub-Saharan Africa," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 31(3-4), pages 447-461.
    16. 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.
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    Keywords

    Aid fragmentation; Tax revenue; Institutional quality; Aid effectiveness;
    All these keywords.

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