Tax Reform and Public Revenue Instability in Developing Countries: Does the Volatility of Development Aid Matter?

Sèna Kimm Gnangnon and Jean Brun ()

Journal of International Development, 2019, vol. 31, issue 8, 764-785

Abstract: This paper examines the relationship between tax transition reform, development aid volatility, and public revenue instability in developing countries. Empirical findings show that tax reform exerts a negative effect on tax revenue instability, and the magnitude of this negative effect diminishes as the degree of development aid volatility increases. Specifically, beyond a certain level of development aid volatility, tax reform enhances tax revenue instability. Overall, these findings suggest that higher development aid flows to developing countries should be accompanied by a lower aid volatility so as to ensure that tax reform would generate lower tax revenue instability in recipient countries. © 2019 John Wiley & Sons, Ltd.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:31:y:2019:i:8:p:764-785

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