Increasing domestic revenue mobilization remains a challenge for many governments, particularly in low-income countries. Using a sample of East African countries, the study sets off to investigate the impact of financial development from a multi-dimensional perspective on tax revenues for the period 1990 to 2014, and how political development and the control of corruption would enhance the observed nexus. The dynamic panel results from the system GMM estimation approach indicate a significant role of financial development overall and the financial institutions and financial markets in particular. A disaggregation of the duo suggests that it is the depth of financial institutions that greatly matters for tax revenue, with a one per cent change expected to yield about 0.26 per cent change in tax collections. It is then followed by their level of accessibility, financial market depth and efficiency. We fail to find significant evidence in support of financial market access and financial institutions efficiency although the possibility for the latter seems indismissible. Further evidence points to the catalytic nature of a good institutional and political environment in pursuit of higher tax-GDP ratio via financial development. Policies to promote the depth and accessibility of financial institutions as well the depth and efficiency of financial markets in East Africa alongside well-focused anti-corruption programs and democratic governance are likely to yield better fiscal outcomes in terms of domestic tax revenues critically needed to achieve the United Nations Sustainable Development Goals. We also confirm the positive role played by the lagged tax revenue, per capita GDP, trade openness, debt-to-GDP ratio and population density in the tax effort.
Purpose The purpose of this paper is to investigate the macro-economic and institutional drivers of remittance inflows to Africa. Design/methodology/approach The paper uses an enhanced gravity model in a random effects framework to test two hypotheses dominant in literature as well as the institutional quality hypothesis. A bilateral data set is created from the most recent available remittance data set to afford the capture of the impact of the selected macro-economic variables from both the host and recipient countries. Findings The results provide support for the trio hypotheses. A key finding is the co-existence of altruism and self-interest motives. Also, control of corruption, financial development and a reduction in unofficial economic activity are observed to facilitate remittance inflows. The authors confirm the resilience of remittances during the global crisis and document a positive significant relationship between remittance inflows on the one hand and host migration stock, age dependency, etc., on the other. Practical implications This paper generates various insights in the design of relevant macro-economic and institutional policies to enhance remittance inflows and the productive use of the same for purposes of economic growth and development via poverty reduction and secure resource flow. Originality/value The majority of previous studies on the determinants of remittance inflows have basically focussed on the microeconomic variables, an approach that could understate the macro-economic impact of remittances and lead to inadequate policy formulation. The use of an enhanced gravity model on a newly created bilateral data set in the analysis is a nuance in the economics of remittances. Besides, previous studies have often ignored the institutional environment as critical in the remittance-determinant model.
The ultimate goal of regional integration is the long-term high economic growth for member states. Tax revenues are critical to achieving this objective, given the high dependence of developing countries on this fiscal revenue. However, empirical studies have been unable to determine whether regional integration improves or impedes the mobilization of taxes. We use data from 1980 to 2014 in order to estimate a tax model; the results based on the generalized method of moments technique reveal that East African regional integration has had a significant impact on tax revenue owing to the presence of good institutions. We advocate any policy agenda aimed at improving institutional environment, financial sector, macroeconomic stability, and manufacturing and trade, as well as a well-integrated approach to reduce a shadow economy. Finally, given the deleterious nature of capital account liberalization, we believe that cautiously designed capital control policies are likely to enhance tax collections in East Africa.
The main aim of the paper was to investigate the role of entrepreneurship on economic performance but with focus on sector-wide growth in 12 selected African countries during the period 2006-2016. Overall, the results suggest that while the quantitative impact of entrepreneurship on economic growth is positively significant, there is a differential effect on the sectors. The service sector in particular is associated positively with entrepreneurship whereas there is no evidence in the data that the growth in the manufacturing and agriculture sectors is influenced by entrepreneurship activities. A further analysis that includes interactions in the model supports the conditionality hypothesis that globalization as well as the quality of institutions and financial development matter in the entrepreneurship-growth nexus. In addition, while internet access and government consumption appear beneficial for the manufacturing and service sectors, the role of personal remittances is observed important for the agriculture sector contribution to GDP whereas trade in services matters for each sector but most significantly in the latter sector. In light of the findings policy recommendations are suggested.
We set out to investigate the relationship between public debt and private investment using a panel of four countries in East Africa for the period 1992-2015. The results from the Autoregressive Distributed Lag Models show that Public Debt (PD) crowds out both Private Domestic Investment (PDI) and Foreign Direct Investment (FDI) in the long run, although the magnitude of the impact is greater for the former category. We fail to find evidence of any short run significant relationship in either case. However, the importance of institutional quality in enhancing relationship in question is unquestionably confirmed in the data. The effect of PD on either PDI or FDI is observed to change when the corruption control improves. The immediate recommendation is the need to design fiscal policies to tame the growing debt that appears to discourage private investment in the region. A proper debt management system coupled with clear policies to improve the institutional quality would likely boost private investment in East Africa. The anti-corruption measures already in place should be enhanced to create a conducive investment climate for the private sector to thrive.
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