The economics and politics of foreign aid and domestic revenue

Arbeitspapier

The main argument of this paper is that there is considerable heterogeneity in the way aid can shape tax performance in developing countries: through behavioural effects, donor conditionality, recipient policy reform and technical assistance; and these effects are country-specific. We investigate these effects by applying the dynamic Common Correlated Effects Mean Group estimator to a dataset comprising 84 developing countries from 1980 to 2013. The following results ensued: aid and taxes comprise an equilibrium relation, with a positive long-run association between aid and taxes; causality runs from aid to taxes, suggesting that on average, changes in aid induce permanent changes in taxes.

Object Details

• ISBN: 978-92-9256-406-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Working Paper ; No. 2017/180

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Fiscal Policy ; Foreign Aid ; Fiscal and Monetary Policy in Development
• Subject: aid ; taxation ; tax reform ; cointegration ; common factor models

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Tagem, Abrams M. E.
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2017

Further information

• DOI: doi:10.35188/UNU-WIDER/2017/406-3
• Handle: http://hdl.handle.net/10419/190025
• Last update: 10.03.2025, 11:42 AM CET