Effet de l’aide publique au développement sur la mobilisation des ressources fiscales dans les pays de l’UEMOA

Effect of foreign aid on fiscal resources mobilization in WAEMU countries

Nimonka Bayale

MPRA Paper from University Library of Munich, Germany

Abstract: In WAEMU countries, the lack of consistent domestic resources for financing development is a real financial handicap. Foreign aid is necessary. However, economic literature is not unanimous on the ability of foreign aid to promote fiscal resources mobilization. In this paper, we analyze the effect of different forms and components of international aid on tax revenues of WAEMU countries using WDI, OECD and BDSM databases. We apply the instrumental variable method to a panel data set covering the period 1985-2016. In our analyzes, we first distinguish bilateral and multilateral aid. Then we also differentiate concessional aid, technical assistance and grants or loans contained in international aid. The results indicate firstly that multilateral aid has a positive and significant impact on tax revenues, while bilateral aid does not. Secondly, with axamine the decomposed effect of aid. Our results show that concessional form of aid and technical assistance enhance fiscal resources mobilization. But loans reduce tax effort. Finally, these results reveal that when aid is taken in aggregate form, its effect on tax revenues is ambiguous. As economic policies implications, we argue that improving institutional quality would make foreign aid efficient in tax collection. We also recommend that foreign aid would be redirected towards investment for effective tax systems in these countries. Moreover, to remedy the disincentive effect created by loans, we particularly argue that they should be channelled more to non-governmental organisations or to the private sector rather than to governments of these countries.

Keywords: Foreign aid; tax revenues; LSDV-IV estimator; WAEMU (search for similar items in EconPapers)
JEL-codes: C33 E62 F35 (search for similar items in EconPapers)
Date: 2019-01-12, Revised 2019-02-03
New Economics Papers: this item is included in nep-mac
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