Heterogeneous Aid Effects on Tax Revenues: Accounting for Government Stability in WAEMU Countries

Hermann Yohou (), Michael Goujon and Wautabouna Ouattara ()

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Abstract: Using a panel threshold model, we examine the heterogeneous effects of foreign aidon tax revenue due to government stability in the West African Economic andMonetary Union countries over the period 1986–2010. Panel Smooth ThresholdRegressions indicate the existence of strong threshold effects in the aid–tax relationshipdepending on the level of government stability. They also indicate that the effectof aid on tax revenue is gradual and varies across countries according to the level ofgovernment stability. We find that aid directly reduces tax revenues but for higherlevels of government stability it enhances tax performance. We provide estimatesof country time-varying coefficients of aid effect. We find on average a positiveimpact of aid. However, the size of this impact is very small, suggesting that thereis still much to do at the institutional level to improve the effectiveness of aid fortax performance in WAEMU countries.

Keywords: foreign aid; government stability; tax revenue; PSTR; WAEMU (search for similar items in EconPapers)
Date: 2016-06-10
Note: View the original document on HAL open archive server: https://hal.science/hal-01687424
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Published in Journal of African Economies, 2016, 25 (3), pp.468 - 498. ⟨10.1093/jae/ejw003⟩

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Related works:
Journal Article: Heterogeneous Aid Effects on Tax Revenues: Accounting for Government Stability in WAEMU Countries (2016)
Working Paper: Heterogeneous Aid Effects on Tax Revenues: Accounting for Government Stability in WAEMU Countries (2015)
Working Paper: Heterogeneous Aid Effects on Tax Revenues: Accounting for Government Stability in WAEMU Countries (2015)
Working Paper: Heterogeneous Aid Effects on Tax Revenues: Accounting for Government Stability in WAEMU Countries (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01687424

DOI: 10.1093/jae/ejw003

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