This paper addresses vulnerability of revenue to external shocks using export composition to capture economic structure and differentiating countries according to income levels, resource endowments and political regimes. This gives a richer characterisation than previous studies. Lower income countries are vulnerable to shocks, especially in terms of trade (associated with the greatest revenue loss): democratic regimes seem to be less vulnerable to revenue losses due to shocks than non-democracies whereas revenue in resource rich countries is more vulnerable to shocks (except natural disasters) than non-resource rich countries. We find a negative relationship between manufacturing exports and revenue in lower income countries.

This paper provides a unique data set on local governance. This dataset measures government decisionmaking at the local level, i.e. the level of government closest to the people. By contrast, the existing literature has focused on decisionmaking at the "sub-national" level. The data set covers 182 countries, and it captures institutional dimensions of political, fiscal and administrative autonomy enjoyed by local governments. These dimensions are then aggregated to develop a "decentralization index" and are then adjusted for heterogeneity to develop a "government closeness index". JEL H10 H11 H83 I31 O10

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in How Close Is Your Government to Its People? Worldwide Indicators on Localization and Decentralization Maksym Ivanyna and Anwar ShahAbstract This paper is intended to provide an assessment of the impact of the silent revolution (decentralization reforms) of the last three decades on moving governments closer to people to establish fair, accountable, incorruptible and responsive governance. To accomplish this, a unique data set is constructed for 182 countries by compiling data from a wide variety of sources to examine success toward decentralized decision making across the globe. An important feature of this data set is that, for comparative purposes, it measures government decision making at the local level rather than at the sub-national levels used in the existing literature. The data are used to rank countries on political, fiscal and administrative dimensions of decentralization and localization. These subindexes are aggregated and adjusted for heterogeneity to develop an overall ranking of countries on the closeness of their government to the people. The resulting index is associated with higher level of human development and lower level of corruption, and thus provides a useful explanation of the Arab Spring and other recent political movements and waves of dissatisfaction with governance around the world. JEL H10 H11 H83 I31 O10

This study uses a dynamic general equilibrium model to quantify the effects of corruption and tax evasion on fiscal policy and economic growth. The model is calibrated to match estimates of tax evasion in developing countries. The calibrated model is able to generate reasonable predictions for net tax rates, the corruption associated with public investment projects, and the negative correlation between corruption and tax revenue. The presence of corruption and evasion is shown to have significant, but not large, negative effects on economic growth. The relatively moderate effects help explain the absence of a robust negative correlation between growth and corruption in cross-country data. The model also implies that cracking down on tax evasion before addressing corruption can be a bad idea and that higher wages for public officials can improve welfare.

Introduction During the past two decades a silent revolution has swept the globe and a large number of industrial and developing countries have pursued decentralization reforms [see Boadway and Shah (2009) and Shah (1998) for motivations for such a change]. The reform agenda has been pursued through varying combinations of political, administrative, and fiscal decentralization initiatives. These reforms have proven to be controversial. This is because decentralization is perceived as a solution to both problemsösuch as a dysfunctional public sector, lack of voice, and exit öas well as a source of new problems ösuch as capture by the local elite, aggravation of macroeconomic management due to lack of fiscal discipline, and perverse fiscal behavior by subnational units. The impact of decentralization on corruption (defined as the abuse of public office for private gain or exercise of official powers against public interest) is an area of growing interest inviting much controversy and debate. However, the empirical literature on this subject is scant, and much of the discussion is grounded in selective anecdotal evidence at the microlevel or macrolevel. In this paper we use new crosscountry data on decentralization and corruption to synthesize and strengthen the empirical foundations of this debate by trying to isolate the role of decentralized decision making in creating an enabling environment for an accountable public sector. With this paper we make several contributions to the existing literature. The existing literature uses subnational governance as an indicator of decentralization. This is not appropriate in many situations as provinces and states in federal countries are typically larger than nation-states in many unitary countries. Therefore, simply shifting responsibilities to an intermediate tier may not represent strengthened local decision making. This paper overcomes this problem by focusing on decentralized

This paper explores the extent to which government revenue is affected by external shocks and whether these effects are different for resource-dependent (RD) as compared with non-RD countries. We are particularly interested in the fate of poorer countries, as we assume they will find it more difficult to implement the policies needed to offset the effect of shocks. Based on data from the International Centre for Taxation and Development Government Revenue Dataset for 1980-2010, we measure the elasticity of tax revenue with respect to terms-of-trade shocks. We find that revenue in RD countries is more vulnerable to such shocks. It is above all the richer countries that appear to be adversely affected, compared with their non-RD counterparts. In contrast, the difference between RD and non-RD countries is less pronounced in the group of poorer countries. We also find that resource-dependent countries became less vulnerable in the 2000s as compared with previous decades. At the same time, political regime type does not seem to matter for the vulnerability of government revenue in these countries.

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Governance for Inclusive Growth by Maksym Ivanyna and Andrea Salerno IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.