[go: up one dir, main page]

IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/101742.html
   My bibliography  Save this paper

Foreign Aid and Fiscal Resources Mobilization in WAEMU Countries: Ambiguous Effects and New Questions

Author

Listed:
  • Bayale, Nimonka
Abstract
This paper analyzes the effect of different types of foreign aid on tax revenues in West African Economic and Monetary Union (WAEMU) countries. A fixed-effects panel model with instrumental variables was developed over the period spanning from 1985 to 2016. The results indicate that multilateral aid affects positively and significantly tax revenues while bilateral aid does not. Moreover, the analysis of the decomposed effect of aid revealed that concessional aid and technical assistance enhance fiscal resources mobilization. However, grants reduce tax effort. The results also show that when aid is aggregated, its effect on tax revenues is ambiguous. These results justify for many reasons the reorientation of foreign aid towards investment for effective tax systems in WAEMU countries in compliance with Addis Ababa Action Agenda 2015 of the third international conference on Financing for Development. Strengthening multilateral partnership is advocated in accordance with the 17th Sustainable Development Goals. Also, an improvement of institutional quality could make foreign aid more efficient for tax collection in the study areas.

Suggested Citation

  • Bayale, Nimonka, 2020. "Foreign Aid and Fiscal Resources Mobilization in WAEMU Countries: Ambiguous Effects and New Questions," MPRA Paper 101742, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:101742
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/101742/1/MPRA_paper_101742.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Aaron Batten, 2010. "Foreign aid, government behaviour, and fiscal policy in Papua New Guinea," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 24(2), pages 142-160, November.
    2. Paul Clist & Oliver Morrissey, 2011. "Aid and tax revenue: Signs of a positive effect since the 1980s," Journal of International Development, John Wiley & Sons, Ltd., vol. 23(2), pages 165-180, March.
    3. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
    4. 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.
    5. Tony Addison & Oliver Morrissey & Finn Tarp, 2017. "The Macroeconomics of Aid: Overview," Journal of Development Studies, Taylor & Francis Journals, vol. 53(7), pages 987-997, July.
    6. Dudley, Leonard & Montmarquette, Claude, 1976. "A Model of the Supply of Bilateral Foreign Aid," American Economic Review, American Economic Association, vol. 66(1), pages 132-142, March.
    7. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    8. Okada, Keisuke & Samreth, Sovannroeun, 2012. "The effect of foreign aid on corruption: A quantile regression approach," Economics Letters, Elsevier, vol. 115(2), pages 240-243.
    9. Dora Benedek & Ernesto Crivelli & Sanjeev Gupta & Priscilla Muthoora, 2014. "Foreign Aid and Revenue: Still a Crowding-Out Effect?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(1), pages 67-96, March.
    10. Paul Clist, 2016. "Foreign aid and domestic taxation: multiple sources, one conclusion," Development Policy Review, Overseas Development Institute, vol. 34(3), pages 365-383, May.
    11. Ndikumana, Léonce & Pickbourn, Lynda, 2017. "The Impact of Foreign Aid Allocation on Access to Social Services in sub-Saharan Africa: The Case of Water and Sanitation," World Development, Elsevier, vol. 90(C), pages 104-114.
    12. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
    13. Hisali, Eria & Ddumba-Ssentamu, John, 2013. "Foreign aid and tax revenue in Uganda," Economic Modelling, Elsevier, vol. 30(C), pages 356-365.
    14. Barthélémy Biao, 2017. "Analyse des effets de l'instabilité de l'aide publique au développement (APD) sur la croissance économique dans les pays africains," African Development Review, African Development Bank, vol. 29(3), pages 416-428, September.
    15. Ernesto Crivelli & Sanjeev Gupta, 2017. "Does Conditionality Mitigate the Potential Negative Effect of Aid on Revenues?," Journal of Development Studies, Taylor & Francis Journals, vol. 53(7), pages 1057-1074, July.
    16. Carter Patrick, 2013. "Does Foreign Aid Displace Domestic Taxation?," Journal of Globalization and Development, De Gruyter, vol. 4(1), pages 161-161.
    17. Subhayu Bandyopadhyay & E. Katarina Vermann, 2013. "Donor motives for foreign aid," Review, Federal Reserve Bank of St. Louis, vol. 95(July), pages 327-336.
    18. Djedje Hermann Yohou & Michaël Goujon & Wautabouna Ouattara, 2016. "Heterogeneous Aid Effects on Tax Revenues: Accounting for Government Stability in WAEMU Countries," Post-Print halshs-01297394, HAL.
    19. Simplice A. Asongu & Jacinta C. Nwachukwu, 2016. "Foreign aid and governance in Africa," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 69-88, January.
    20. William Easterly & Ross Levine & David Roodman, 2004. "Aid, Policies, and Growth: Comment," American Economic Review, American Economic Association, vol. 94(3), pages 774-780, June.
    21. Jean-Louis Combes & Rasmane Ouedraogo & Sampawende J.-A. Tapsoba, 2016. "Structural shifts in aid dependency and fiscal policy in developing countries," Applied Economics, Taylor & Francis Journals, vol. 48(46), pages 4426-4446, October.
    22. Tavares, Jose, 2003. "Does foreign aid corrupt?," Economics Letters, Elsevier, vol. 79(1), pages 99-106, April.
    23. Giovanni S. F. Bruno, 2005. "Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals," Stata Journal, StataCorp LP, vol. 5(4), pages 473-500, December.
    24. Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-445, June.
    25. 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.
    26. Carter Patrick, 2013. "Does Foreign Aid Displace Domestic Taxation?," Journal of Globalization and Development, De Gruyter, vol. 4(1), pages 1-47, August.
    27. Nick Macaluso & Sugandha Tuladhar & Jared Woollacott & James R. Mcfarland & Jared Creason & Jefferson Cole, 2018. "The Impact Of Carbon Taxation And Revenue Recycling On U.S. Industries," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(01), pages 1-41, February.
    28. John Thornton, 2014. "Does foreign aid reduce tax revenue? Further evidence," Applied Economics, Taylor & Francis Journals, vol. 46(4), pages 359-373, February.
    29. Steve Radelet, 2006. "A Primer on Foreign Aid," Working Papers 92, Center for Global Development.
    30. Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, vol. 104(425), pages 876-882, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bayale, Nimonka & Tchagnao, Abdou-Fataou & Chavula, Hopestone Kayiska, 2020. "More elections, more burden? On the relationship between elections and public debt in Africa," MPRA Paper 101744, University Library of Munich, Germany.
    2. Nimonka Bayale & Pouwemdéou Tchila & Jacques‐Patrick Arnold Yao & Honoré Tenakoua, 2022. "Do tax administration reforms improve tax revenue performance in Togo? Empirical insights from experimental approaches," South African Journal of Economics, Economic Society of South Africa, vol. 90(2), pages 196-213, June.
    3. Dossè Mawussi Djahini‐Afawoubo, 2024. "Understanding tax payment behaviour in the West African Economic and Monetary Union: The role of perceived detection capacity and honesty," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(2), pages 795-823, March.
    4. Nimonka Bayale & Abdou‐Fataou Tchagnao & Madow Nagou & Pouwemdéou Tchila, 2023. "Beneficial impact of tax reforms on tax revenue performances in Togo: Myth or reality?," Bulletin of Economic Research, Wiley Blackwell, vol. 75(4), pages 1323-1343, October.
    5. Milly Chepkorir Chebochok & Nimonka Bayale, 2023. "Effects of financial inclusion on tax revenue mobilization: Evidence from WAEMU countries," African Development Review, African Development Bank, vol. 35(2), pages 226-238, June.

    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. BAYALE, Nimonka, 2019. "Effet de l’aide publique au développement sur la mobilisation des ressources fiscales dans les pays de l’UEMOA [Effect of foreign aid on fiscal resources mobilization in WAEMU countries]," MPRA Paper 92214, University Library of Munich, Germany, revised 03 Feb 2019.
    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. Liu, Feng & Liu, Fengrui & Huang, Jiqiang & Dong, Haoran, 2024. "Aid and national tax capacity: Empirical evidence from Chinese aid," China Economic Review, Elsevier, vol. 85(C).
    4. Djedje Hermann YOHOU & Michaël GOUJON & Bertrand LAPORTE & Samuel GUERINEAU, 2016. "Is Aid Unfriendly to Tax? African Evidence of Heterogeneous Direct and Indirect Effects," Working Papers 201608, CERDI.
    5. Abrams M.E. Tagem, 2017. "The economics and politics of foreign aid and domestic revenue," WIDER Working Paper Series 180, World Institute for Development Economic Research (UNU-WIDER).
    6. Brun, Jean-François & Gnangnon, Sèna Kimm, 2017. "Does trade openness contribute to driving financing flows for development?," WTO Staff Working Papers ERSD-2017-06, World Trade Organization (WTO), Economic Research and Statistics Division.
    7. Gnangnon, Sèna Kimm & Brun, Jean-François, 2018. "Is the impact of development aid on government revenue sustainable? An empirical assessment," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 311-325.
    8. Abrams M.E. Tagem, 2017. "The economics and politics of foreign aid and domestic revenue," WIDER Working Paper Series wp-2017-180, World Institute for Development Economic Research (UNU-WIDER).
    9. Nimonka Bayale, 2019. "Effect of foreign aid on fiscal resources mobilization in WAEMU countries [Effet de l’aide publique au développement sur la mobilisation des ressources fiscales dans les pays de l’UEMOA]," Working Papers hal-02021939, HAL.
    10. Abreham Adera, 2024. "Chinese Aid Projects and Local Tax Attitudes: Evidence from Africa," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(1), pages 102-134, February.
    11. Giulia Mascagni, 2014. "Aid and Taxation: Evidence from Ethiopia," Working Paper Series 7314, Department of Economics, University of Sussex Business School.
    12. Stijn Claessens & Danny Cassimon, 2007. "Empirical evidence on the new international aid architecture," WEF Working Papers 0026, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    13. Nagae, Akira & Katayama, Hajime & Takase, Koichi, 2022. "Donor aid allocation and accounting standards of recipients," Economic Modelling, Elsevier, vol. 106(C).
    14. Sena Kimm Gnangnon, 2020. "Effect of Development Aid on Tax Reform in Recipient-Countries: Does Trade Openness Matter?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-23, January.
    15. Prichard, Wilson, 2016. "Reassessing Tax and Development Research: A New Dataset, New Findings, and Lessons for Research," World Development, Elsevier, vol. 80(C), pages 48-60.
    16. Ernesto Crivelli & Sanjeev Gupta, 2017. "Does Conditionality Mitigate the Potential Negative Effect of Aid on Revenues?," Journal of Development Studies, Taylor & Francis Journals, vol. 53(7), pages 1057-1074, July.
    17. repec:idq:ictduk:13654 is not listed on IDEAS
    18. repec:idq:ictduk:13751 is not listed on IDEAS
    19. Simplice A. Asongu, Nicholas M. Odhiambo, 2021. "Taxation, foreign aid and political governance in Africa," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 18(2), pages 217-249, December.
    20. Rasmane Ouedraogo & Windemanegda Sandrine Sourouema & Hamidou Sawadogo, 2021. "Aid, growth and institutions in Sub‐Saharan Africa: New insights using a multiple growth regime approach," The World Economy, Wiley Blackwell, vol. 44(1), pages 107-142, January.
    21. Sèna Kimm Gnangnon & Jean-François Brun, 2019. "Internet and the structure of public revenue: resource revenue versus non-resource revenue," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-26, December.
    22. Sena Kimm Gnangnon & Jean-François Brun, 2018. "Impact of Multilateral Trade Liberalization on Resource Revenue," Economies, MDPI, vol. 6(4), pages 1-19, November.

    More about this item

    Keywords

    Foreign aid types; Tax revenues; Panel data analysis; WAEMU;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F35 - International Economics - - International Finance - - - Foreign Aid

    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:pra:mprapa:101742. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.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.