Trade Liberalization, Exchange Rate Changes, and Tax Revenue in Sub-Saharan Africa

Agbeyegbe, Terence D.; Stotsky, Janet Gale; WoldeMariam, Asegedech

doi:10.2139/ssrn.879003

Cited by 25 publications

(25 citation statements)

References 21 publications

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“…Many of the studies on the determinants of tax revenue share (Agbeyegbe et al, 2006;Baunsgaard and Keen, 2010;Crivelli and Gupta, 2014;Crivelli, 2016;Brun, 2018, 2019) have used the GMM system approach, including the two-step system GMM estimator proposed by Arellano and Bover (1995) and Blundell and Bond (1998) to estimate the dynamic relationship between tax revenue and its determinants. The present analysis follows this practice, and estimates the dynamic model (1) using the two-step system GMM Note: The variable "TAX" is the ratio of non-resource tax revenue to GDP, whereas the variable "TAXINST" is the indicator of instability of the ratio of non-resource tax revenue to GDP Source: Author estimator.…”

Section: Empirical Methodologymentioning

confidence: 99%

“…There is a voluminous literature on the determinants of tax revenue (Agbeyegbe et al, 2006;Baunsgaard and Keen, 2010;Bird et al, 2008;Brun et al, 2015;Clist, 2016;Clist and Morrissey, 2011;Crivelli, 2016;Crivelli and Gupta, 2014;Ghura, 1998;Gnangnon and Brun, 2017Khattry and Rao, 2002;Morrissey et al, 2016;Yohou et al, 2016). This literature has shown the existence of structural factors that influence countries' tax revenue performance.…”

Section: Tax Revenue Instability 2 Model Specificationmentioning

confidence: 99%

“…A rise in the population size can be negatively associated with tax revenue because in countries with faster growing populations, the tax system may lag behind in the ability to capture new taxpayers (Bahl, 2003). Terms of trade improvements can positively affect tax revenue, including through the rise in the related trading corporate tax revenue (owing to the increase in the profitability of exporting firms) (Agbeyegbe et al, 2006). However, governments may be less incentivized to collect tax revenue when countries experience terms of trade improvements, thereby leading to a negative relationship between terms of trade improvements and tax revenue.…”

Section: Tax Revenue Instability 2 Model Specificationmentioning

confidence: 99%

“…These include, for example,Agbeyegbe et al (2006);Baunsgaard and Keen (2010);Bird et al (2008);Brun et al (2015);Clist (2016);Clist and Morrissey (2011);Crivelli (2016);Crivelli and Gupta (2014);Ghura (1998);Gnangnon and Brun (2017;Khattry and Rao (2002);Morrissey et al (2016);and Yohou et al (2016).3 It is important to underline that the UNU-WIDER data set (Appendix 1) can be considered as being the best source of information on government revenue at this moment, and one can argue that the distinction between resource and non-resource revenue is a tricky one and involves some choices, particularly regarding the poorer countries. To some extent, this choice can affect the estimations' outcomes.…”

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confidence: 99%

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Tax revenue instability and tax revenue in developed and developing countries

Gnangnon

2021

AEA

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Purpose This paper aims to explore the effect of non-resource tax revenue instability on non-resource tax revenue in developed and developing countries. Design/methodology/approach The analysis has used an unbalanced panel data set of 146 countries over the period 1981–2016, as well as the two-step system generalized methods of moment approach. Findings The empirical analysis has suggested that non-resource tax revenue instability influences negatively non-resource tax revenue share of gross domestic product. The magnitude of this negative effect is higher in less developed countries than in relatively advanced countries. This negative effect materializes through public expenditure instability: non-resource tax revenue instability exerts a higher effect on non-resource tax revenue share as the degree of public expenditure instability increases. Finally, non-resource tax revenue instability exerts a higher negative effect on non-resource tax revenue share as economic growth volatility rises, inflation volatility increases and terms of trade instability increases. Research limitations/implications The main policy implication of this analysis is that policies that help ensure the stability of non-resource tax revenue also contribute to improving countries’ non-resource tax revenue share. For example, governments’ measures that help cope with or prevent the severe adverse effects of shocks on economies (shocks that could translate into higher tax revenue instability) would ultimately help enhance countries’ tax revenue performance. Practical implications The severity of the current COVID-19 pandemic shock (which is a supply and demand shock) and the macroeconomic uncertainty that it has generated – inter alia, in terms of economic growth instability, terms of trade instability, inflation volatility and public expenditure instability – are likely to result in severe tax revenue losses. Governments in both developed and developing countries would surely learn from the management of this crisis so as to prepare for possible future economic, financial and health crises with a view to dampening their adverse macroeconomic effects, including here their negative tax revenue effects. Originality/value To the best of the author’s knowledge, this topic is being addressed in the empirical literature for the first time.

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Section: Empirical Methodologymentioning

confidence: 99%

Section: Tax Revenue Instability 2 Model Specificationmentioning

confidence: 99%

Section: Tax Revenue Instability 2 Model Specificationmentioning

confidence: 99%

mentioning

confidence: 99%

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Tax revenue instability and tax revenue in developed and developing countries

Gnangnon

2021

AEA

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“…There exists a wealth of studies on the macroeconomic determinants of public revenue, particularly in developing countries (See, for example, Agbeyegbe et al, 2006; Bahl, 2003; Baunsgaard & Keen, 2010; Brun et al, 2011, 2015; Crivelli & Gupta, 2014; Ebrill et al, 1999; Ghura, 1998; Gupta, 2007; Khattry & Rao, 2002; Stotsky & WoldeMariam, 1997; Thomas & Treviño, 2013). For policymakers in developing countries, mobilizing higher public revenue is key for achieving development objectives, the chief of which being to reduce, and ultimately eliminate poverty.…”

Section: Introductionmentioning

confidence: 99%

Does Poverty Matter for Tax Revenue Performance in Developing Countries?

Gnangnon

2021

South Asian Journal of Macroeconomics and Public Finance

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This article explores the effect of poverty on tax revenue performance (tax revenue share), using an unbalanced panel data set of 102 developing countries over the period from 1996 to 2015. Based on the two-step system generalized methods of moments (GMM) approach, the empirical analysis shows that higher poverty rates significantly reduce tax revenue performance in developing countries. However, the magnitude of this negative effect is lower in least developed countries (LDCs) than in other countries of the sample. The analysis has also revealed that the tax revenue performance effect of poverty depends on the level of household consumption as well as the prevailing unemployment rate in the economy. Finally, development aid inflows help to mitigate the negative effect of poverty on tax revenue performance in developing countries. These findings not only highlight the importance of poverty for tax revenue performance in developing countries, but they additionally show that the provision of higher amounts of development aid to these countries could help them mitigate the adverse tax revenue effect of poverty, and even allow them to enjoy higher tax revenue performance, which is key for attaining their development objectives. JEL Classification: I30, I32, H20

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