We examine the heterogeneous effects due to government stability of foreign aid on tax revenues in the West African Economic and Monetary Union countries over the period 1986-2010. We show that the tax effects of aid are gradual and varying across countries according to the level of government stability. The Panel Smooth Threshold Regressions indicate that at low levels of government stability, aid negatively affects tax performances. At high levels, it encourages tax collection. Consequently, we provide estimates of individual time varying coefficients of aid effects. In general, the positive effects are marked since the mid of 1990 decade. However, decomposing aid into its forms of loans, technical and non-technical grants provides nuanced results.
Several studies have demonstrated that corruption hinders efforts in enhancing public revenue and fiscal space through different channels. This paper assesses the effect of tax reform on fiscal space conditional on corruption control for a large panel of developing and emerging economies over 1990-2016. Using a threshold approach, our findings indicate that tax reform effect on fiscal space is not monotonic and depends on corruption control. Tax reform enhances fiscal space and tax revenue when corruption control is better. The results also suggest that heterogeneity across countries and time does matter. Individual estimates of elasticity of fiscal space to tax reform support evidence that countries that benefit most from tax reform are those that prove enough ability to control corruption.
This article examines the effect of energy subsidies on human capital spending for a sample of 57 emerging and developing countries over the period 2004-2019. The results of the system-based GMM approach reveal that energy subsidies negatively and significantly influence social spending on human capital in the full panel, the poor and resource-rich countries in our sample. These results confirm a political implication which consists in rationalizing energy subsidies in order to raise funds to support social spending on human capital in emerging and developing countries.
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