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Using a panel threshold model, we examine the heterogeneous effects of foreign aid on tax revenue due to government stability
in the West African Economic and Monetary Union countries over the period 1986–2010. Panel Smooth Threshold Regressions indicate
the existence of strong threshold effects in the aid–tax relationship depending on the level of...
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Citations
... Furthermore, it avoids using a dummy variable to characterize belonging to one regime or the other; hence the linearity test escapes the criticism of Hansen (1996) relative to the equality between the coefficients associated with the two regimes that involve a nuisance problem. The recent theoretical developments conducted by Béreau et al., (2012), Yu (2013), and Yohou et al., (2016) reveal that the PTR threshold effect models and the PSTR resolve the endogeneity problem due to the temporal variability of the coefficients. ...
The paper aims to empirically assess the threshold effect in the large shareholders (LS) and bank performance relationship. We used a sample of MENA banks during the period 2004–2017. To get benefit from a comparative regional analysis, the whole sample was divided into two sub-samples, banks in the Middle East and banks in North Africa. We performed the Panel Smooth Transition Regression model (PSTR) as an econometric approach. Empirical results indicate a threshold effect in the large shareholders-bank performance relationship. Additionally, results show that this effect differs across regions. More specifically, we found that, below the threshold, large shareholders significantly decrease bank performance for the whole sample. Surpassing this threshold, the effect becomes positive. The opposite result was found for banks located in the Middle East region. However, no significant effect was found for banks in North African countries in almost regressions.
... It represents the difference between the international price and the average cost of extracting the resource, multiplied by the quantity extracted per year (Couttenier, 2012). Studies conducted on the determinants of tax revenues support a positive effect of natural resources (Yohou et al. 2016;Brun and Diakité, 2016;Gupta and Crivelli, 2014). The expected sign for this variable is positive. ...
The aim of this paper is to establish the effect of terrorism on the fiscal performance of Sub-Saharan African countries, through the mobilization of tax revenues. Considering 15 countries over the period 1996-2015 and using a fixed-effect model, the results show that terrorism has a negative effect on the mobilization of tax revenues. The discretionary power of the State is thus strengthened as terrorist threat puts the State in wartime posture. As such, radical measures can be envisaged, such as the redefinition of national priorities and a reallocation of national resources to the fight against terrorism.
Codes JEL: E62; H2; C32; H51.
... Some studies have been devoted to examining the role of institutional factors in fiscal space expansion and highlight that they play a crucial role in enhancing government revenue (Bird et al., 2008;Yohou, Goujon, Laporte, & Guerineau, 2016;Yohou, Goujon, & Ouattara, 2016). Amongst these institutional variables, corruption is undoubtedly considered the variable with the most potentially harmful effects on public finances (Attila et al., 2009;Hindriks et al., 1999;Mauro, 1995Mauro, , 1998Rose-Ackerman & Coolidge, 1997;Shleifer & Vishny, 1993;Wei, 1997;World Bank, 1997). ...
... The interactive terms assume a common estimate for all the countries regardless of time, overlooking any effects of learning by doing that seems evident with institutional developments. These approaches may therefore underestimate the role of individual and time heterogeneities, and thus mislead policy implications (Yohou, Goujon, Laporte, & Guerineau, 2016;Yohou, Goujon, & Ouattara, 2016). We thoroughly address this issue using the Panel Smooth Threshold Regression model developed by González et al. (2005) and Fok et al. (2005). ...
... It allows to highlight the heterogeneous gradual and individual effects according to the level of control of corruption. Yohou, Goujon, Laporte, and Guerineau (2016) and Yohou, Goujon, and Ouattara (2016) have used this approach to estimate the aid-tax relationship upon government stability. ...
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.
... There are a number of studies that reveal the influence of each control variable in this study on tax revenue. Studies show that income per capita has a positive effect on tax revenue in 34 countries OECD member countries from 2001 to 2011 (Ángeles Castro & 307 p-ISSN: 2503-4235 Ramírez Camarillo, 2014), and 120 developing countries in the world from 1990 to 2012 (Yohou et al., 2016). However, different findings were obtained by Nguyen & Duong (2022) in BRICS countries in the period 2001-2017, (Imam & Jacobs, 2014) in 12 Middle Eastern countries during 1990 to 2003 who found that income per capita had a negative effect on tax revenue. ...
... The industry's share of GDP has a positive influence on tax revenue in 34 OECD countries in 2001-2011(Ángeles Castro & Ramírez Camarillo, 2014, and Southeast Asia region countries from 2006 to 2015 (Anh & Thinh, 2018). Meanwhile, studies by Oz-Yalaman (2019) and Yohou et al., (2016) show different results that industry share per GDP has a negative effect on tax revenue. ...
... Jump in to the discussion related to control variables result, it can be inferred that high per capita growth will add to the government's tax collection that can be done so that our findings are in line with the findings Ángeles Castro & Ramírez Camarillo (2014), and Yohou et al. (2016). The relationship between per capita income and tax revenue is clear, the higher the per capita income, the greater the ability of the state to obtain tax revenues. ...
Tax revenue of Organization of Islamic Cooperation (henceforth OIC) countries has not reached the global average, and so has the financial inclusion. Notwithstanding this fact, few researchers have addressed the effect of financial inclusion on tax revenue in the context of Islamic finance while it is undeniably having significant connection to the real sector. Drawing on this crucial issue, the present study calls into the possible effect of Islamic banking financial inclusion on tax revenue in eleven countries of OIC membership consisting of Indonesia, Jordan, Kazakhstan, Kuwait, Malaysia, Nigeria, Oman, Pakistan, Saudi Arabia, Turkey, and the United Arab Emirates in the period of 2013 to 2019. The data were analyzed under the procedure of panel data regression using fixed effect model. The result depicted that Islamic banking financial inclusion, in terms of financial access and financial usage, had no significant effect on tax revenue of the OIC countries. This result is reasonable, since Islamic banking financial inclusion still requires massive promotion particularly by the OIC countries included in this study. Hence, this study leaves an implication for OIC countries to foster Islamic banking financial inclusion as a crucial effort to increase the tax revenue, in which Islamic banks play a promising role for sharia-compliance-based financial transactions in the recent years.
... Furthermore, it avoids using a dummy variable to characterize belonging to one regime or the other; hence, the linearity test escapes the criticism of Hansen (1996) relative to the equality between the coefficients associated with the two regimes that involve a nuisance problem. The recent theoretical developments conducted by Bereau, Villavicencio, and Mignon (2012), Yohou, Goujon, and Ouattara (2016) and Yu (2013) reveal that the PTR threshold effect models and the PSTR resolve the endogeneity problem due to the temporal variability of the coefficients. ...
The purpose of this article is to check whether there is a threshold effect in the government stability, corruption and non‐performing loans (NPLs) relationship in the MENA region. To this end, we used a sample of MENA banks over the period 2004–2017. Empirical results of the panel smooth transition regression model indicate that there is a threshold effect in the government stability, corruption and NPLs relationship. More specifically, we have found that the impact of corruption and government stability on NPLs is negative and significant only if a certain threshold level has been attained; until then, the effect is insignificant.
... Following previews theoretical and empirical works in the field (Bayale, 2020;Diakite et al., 2017;Gupta, 2007;Lotz & Morss, 1970;Ndiaye, 2019;Ouma, 2019;Teera & Hudson, 2004;Udezo & Onuora, 2021;Yohou et al., 2016), in this paper, we incorporate four sets of predictors (economic, productive specialisation or structural and social variables and institutional factors) as tax revenues' drivers in order to construct synthetic control. ...
... It may act on tax compliance knowing that demand for public infrastructure increases with the level of development (Diakite et al., 2017;Gupta, 2007). Trade volume is measured as the sum of exports and imports of goods and services as a percentage of GDP (Yohou et al., 2016). We employ trade openness because commercial transactions usually take place in a specific place, and one can imagine that it is easier to collect the tax. ...
... Some predictors such as broad money, net aid, debt service and population growth are also included (Teera & Hudson, 2004). As explained by Yohou et al. (2016) and Bayale (2020), foreign aid for instance may affect the revenue mobilisation in two ways depending on its component: (i) The dependence to aid may negatively affect the intention of countries to mobilise domestic resources, and (ii) aid provided as technical assistance may be favourable to countries tax management and thereby tax performance. ...
Tax administration reforms are often motivated by their potential to improve tax revenue mobilisation. However, their actual impacts are difficult to quantify. Using cross‐country panel data over the period 1990–2018, this paper analyses the impact of the 2012 tax administration reform on tax revenue performance in Togo. The estimation procedures that we follow are the synthetic control method (SCM) and the propensity score matching (PSM). After comparing the observed evolution of Togo's tax revenue output in the period 2013–2018 with that of synthetic Togo, our estimates show an accumulated gain in the tax‐to‐GDP ratio of a yearly average of about 2.8%. The results pass a battery of checks. Hence, the paper concludes that after almost 9 years of reform, the improvement in Togo's tax performance is remarkable. However, more tax‐related and institution‐related reforms are crucial to make Togo's tax system more buoyant and sustainably improved tax revenue mobilisation.
... Agbeyegbe et al. (2006) examined the effect on tax revenue in Sub-Saharan Africa of trade liberalization and exchange rate shifts. The effect of international aid, either its direct or contingent effect, on tax revenues is being studied by an increasing number of studies (Clist and Morrissey, 2011;Prichard et al., 2013;Yohou et al., 2016;Crivelli and Gupta, 2016;Ackah-Baidoo, 2016;Alsharif et al., 2017;Arvanitis and Weigert, 2017;Ayelazuno, 2014;Badeeb et al., 2017;Ben-Salha et al., 2018;Bergman, 2002;Sala-i-Martin and Subramanian, 2013;Van Alstine et al., 2014: Olanya, 2015Parcero and Papyrakis, 2016;Castro and Ramírez, 2014;Cockx and Francken, 2016;Lawer et al., 2017;Wigley, 2017). The degree to which government revenue is influenced by external shocks was discussed by von Haldenwang and Ivanyna (2017) and whether these effects are different for resource-rich countries compared to non-resource-rich ones. ...
The study investigated the empirical relationship between natural resource dependence and tax effort in 28 Sub-Saharan African countries, with data for the period 1996-2016. The findings indicated that in economies with oil rents, less efforts is invested on other non-oil-resource revenues. In these countries, trade openness deteriorates tax revenue efforts, consequently the bulk of government revenue come from the sale of crude oil. In contrast, economies without oil rents seem to channel more efforts towards non-oil-tax revenue. In these economies, our result showed that trade openness is an important improvement to tax revenues. We recommend that for economies with oil rents, proper tax record keeping and documentation of separate revenue sources be maintained. Conversely, other resources rent economies are also recommended to depend less on natural resources rents and grants from foreign donors; and maintain a policy of no non-tariff barriers to trade, except for health, social and security reasons.
... Political instability is another reason for low tax effort in developing countries. In countries that experience political instability, citizens might prefer building up savings to access private services instead of paying taxes since they do not rely on the pledges of governments towards a rise of quality in public services and economic growth (Yohou et al., 2015). It can be claimed that political stability, management effectiveness, and trust in government are like preconditions for a fair, effective, and efficient taxation system (Everest-Philips and Sandall, 2009). ...
This study aims to empirically analyze the impact of governance quality on tax effort in Sub-Saharan African (SSA) countries. Based on a dataset for 37 SSA countries over the time period of 2002-2015, the governance and tax effort relationships is examined by using conventional panel data models and system-generalized method of moment (Sys-GMM) estimators. Unlike previous studies, this study analyzes the impact of both six
governance indicators of the World Bank and the composite quality of governance index on tax effort. The empirical findings indicated that composite governance and all of the governance indicators positively affect tax effort in SSA countries. The robust empirical findings also indicate that democracy representatives such as voice and accountability and the rule of law are relatively more important determinants of tax effort in SSA countries.
... We explore the effect of financial development on non-resource tax revenue performance in developing countries by considering a baseline dynamic model specification, which links financial development to non-resource tax revenue along with a number of control variables that represent country's tax base (e.g., Reinsberg et al. 2020). The latter are indeed structural factors that influence public revenue performance in developing countries, and appear virtually in all relevant studies on the determinants of public revenue performance (e.g., Agbeyegbe et al. 2006;Baunsgaard and Keen 2010;Bird et al. 2008;Crivelli 2016;Crivelli and Gupta 2014;Ghura 1998;Gnangnon and Brun 2017, 2018Khattry and Rao 2002;Mosley 2015;Reinsberg et al. 2020;Yohou et al. 2016). These control variables include the real per capita income, denoted "GDPC", which acts as a measure of countries' development level; the share (%) of the value added in the agricultural sector in the total output, denoted "SHAGRI"; the inflation rate, which after being transformed, is denoted "INFL" (see Appendix 1); the level of democracy 8 (as a proxy for the prevailing institutional quality) denoted "POLITY2"; the terms of trade, denoted "TERMS", and the population size, denoted "POP". ...
This study examines the effect of financial development on non-resource tax revenue performance in developing countries through the international trade channel. The empirical analysis has relied on a sample of 104 developing countries over the period 1980–2014, and used the two-step system Generalized Methods of Moments (GMM) approach. Results show that financial development exerts a positive effect on non-resource tax revenue performance. Interestingly, this positive effect takes place through a higher trade openness, a greater export product diversification and a higher share of manufactured exports in total export products. The analysis, therefore, highlights some avenues through which deepening domestic financial markets can affect tax revenue performance in developing countries.
... 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. ...
... 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); andYohou 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. ...
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.
