Tax revenue instability in Sub‐Saharan Africa: Does institutional quality matter?

Mahamoudou Zore () and Roukiatou Nikiema
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Mahamoudou Zore: LEDi - Laboratoire d'Economie de Dijon [Dijon] - UB - Université de Bourgogne - UBFC - Université Bourgogne Franche-Comté [COMUE]
Roukiatou Nikiema: Université Norbert ZONGO de Koudougou

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Abstract: Sub‐Saharan African (SSA) nations face a dual fiscal challenge: the need to increase tax revenue mobilization and to manage revenue instability. This paper examines the causal impact of institutional quality on tax revenue stability in SSA from 2000 to 2020. Using UNU‐WIDER data and the System GMM technique, the study finds that institutional quality reduces tax revenue instability, with a stronger effect on indirect tax revenues than on direct taxes. This result is robust to changes in the measure of tax revenue instability, the measure of quality of institutions, the sample, and the time horizon. The effect is particularly pronounced in resource‐rich countries and in countries experiencing economic growth. The article's results are relevant to tax policy, specifically the necessary adjustments to improve tax revenue stability through institutional quality.

Date: 2024
Note: View the original document on HAL open archive server: https://hal.science/hal-04986192v1
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-04986192

DOI: 10.21203/rs.3.rs-4165753/v1

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