Fiscal Composition and Aid Effectiveness: A Political Economy Model

Paul Mosley

World Development, 2015, vol. 69, issue C, 106-115

Abstract: In the long run tax effort, we argue, determines the effectiveness of aid, and this relationship operates simultaneously with the negative link in the opposite direction observed by Bräutigam and Knack (2004) and others. Tax effort and the ability of the state to diversify its taxation structure, we find, are significantly linked to growth and poverty indicators. The key message for policy is that a broadening of the tax structure in low-income countries is crucial in order to enable those countries to escape from the “weak-state–low-tax trap,” and to make aid effective.

Keywords: overseas aid; aid effectiveness; political economy; fiscal policy; tax policy (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:69:y:2015:i:c:p:106-115

DOI: 10.1016/j.worlddev.2013.12.020

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