Does Poverty Matter for Tax Revenue Performance in Developing Countries?

Author(s):  
Sèna Kimm Gnangnon

This article explores the effect of poverty on tax revenue performance (tax revenue share), using an unbalanced panel data set of 102 developing countries over the period from 1996 to 2015. Based on the two-step system generalized methods of moments (GMM) approach, the empirical analysis shows that higher poverty rates significantly reduce tax revenue performance in developing countries. However, the magnitude of this negative effect is lower in least developed countries (LDCs) than in other countries of the sample. The analysis has also revealed that the tax revenue performance effect of poverty depends on the level of household consumption as well as the prevailing unemployment rate in the economy. Finally, development aid inflows help to mitigate the negative effect of poverty on tax revenue performance in developing countries. These findings not only highlight the importance of poverty for tax revenue performance in developing countries, but they additionally show that the provision of higher amounts of development aid to these countries could help them mitigate the adverse tax revenue effect of poverty, and even allow them to enjoy higher tax revenue performance, which is key for attaining their development objectives. JEL Classification: I30, I32, H20

Author(s):  
Sena Kimm Gnangnon

The COVID-19 pandemic, like previous major crises, such as the 2008 financial crisis, has had a severe negative impact on international trade flows. International institutions are now exploring ways to help their member states recover from the health crisis, and foster the resilience of their economies to future crises. As far as trade is concerned, institutions that deal primarily with trade matters are making effort to help their member states foster the resilience of their trade performance to future shocks. In this context, the World Trade Organization (WTO), which is the only international organization that deals with the global rules of trade between nations, has organized a series of events since the onset of the COVID-19 pandemic. It has now planned to hold in September 2021 the 2021 WTO Public Forum whose theme is "Trade Beyond COVID-19: Building Resilience". The present paper aims to contribute to this debate by examining the effect of development aid, i.e., the so-called official development aid, in particular its Aid for Trade (AfT) component, on export resilience. The resilience of exports refers to the capacity of countries' aggregate exports to resist to shocks, whether environmental or external shocks. The core argument of the analysis is that development aid would affect export resilience through its effect on productive capacities. The analysis covers 93 developing countries over the period 2002-2018. The findings indicate that total development aid flows, including both AfT flows and NonAfT flows exert a positive effect on export resilience. Among AfT components, AfT for productive capacities appears to exert a higher positive effect on export resilience than AfT for economic infrastructure and AfT for trade policy and regulation. In addition, development aid (whatever the aid variable considered) exerts the highest positive effect on export resilience in countries (such as Least developed countries - LDCs) that have the lowest level of productive capacities. These findings highlight the need for donor-countries to supply higher development aid flows, in particular AfT flows to countries such as LDCs that have low levels of productive capacities.


2020 ◽  
Vol 9 (1) ◽  
pp. 22-57
Author(s):  
Sèna Kimm Gnangnon

The implementation of sustainable development goals (SDGs) adopted in 2015 by the international community in the Agenda 2030 requires a substantial mobilization of financial resources. In the meantime, Goal 17 of this Agenda recognizes trade as an important means of the implementation of the SDGs. The current article investigates empirically the impact of openness to international trade on the diversification of external financial flows for development, which could help developing countries achieve the SDGs by 2030. To that end, three major external flows for development have been considered: development aid inflows, migrants’ remittances inflows and foreign direct investment (FDI) inflows. The analysis relies on a panel data set comprising 116 countries, over the period 1970–2017. The empirical analysis relies primarily on the two-step system generalized method of moments (GMM) approach and shows that greater trade openness exerts a positive and significant impact on the diversification of external financial flows for development, in particular, in the least developed countries (LDCs). As a result, greater openness to international trade could be an important tool for external capital flows diversification in developing countries. JEL Classification: F13, F14, F21, F24, F35, O20


2014 ◽  
Vol 20 (3) ◽  
pp. 237-262 ◽  
Author(s):  
Gil Avnimelech ◽  
Yaron Zelekha ◽  
Eyal Sharabi

Purpose – The purpose of this paper is to focus on the relationship between corruption and productive entrepreneurship in general and whether it depends on countries’ specific characteristics in particular. Design/methodology/approach – The authors used a unique data set of entrepreneurial activity within 176 countries, collected from the professional networking site LinkedIn. The authors used OLS regression to estimate the level of entrepreneurship. The main independent variable was the CPI score (Transparency International). In addition, two sub-samples were used, 70 less-developed countries and 34 OECD countries, and numerous control variables. Findings – The paper makes three important contributions to the field. First, it proposes worldwide empirical evidence that countries with high levels of corruption usually face low levels of productive entrepreneurship. Second, the paper suggests that the negative effect is much more significant in developed countries than in developing countries. Third, the paper explores whether the negative effect of corruption depends on country-specific economic characteristics. Research limitations/implications – While there is significant value in using LinkedIn data in entrepreneurship research, there are limitations to this database. Therefore, significant robustness tests were employed and further research, for instance using longitudinal LinkedIn data, could be valuable. Moreover, using different entrepreneurs’ data sets might increase the validation of the results. Finally, further examination of the influence of corruption on different types of entrepreneurial activities and their interaction with different characteristics of the country is still required. Originality/value – The results stress the need to fight corruption not only in developing countries and suggests significant gains from anti-corruption efforts even and maybe especially in the western developed world.


2019 ◽  
Vol 46 (2) ◽  
pp. 496-515 ◽  
Author(s):  
Sena Kimm Gnangnon

Purpose The purpose of this paper is to examine the impact of multilateral trade policy (MTP) liberalization on developing countries’ economic exposure to shocks. Design/methodology/approach The analysis is conducted on a panel data set comprising 120 countries over the period 1996–2013 and uses the within fixed effects estimator. Findings The empirical results suggest that over the entire sample as well as sub-samples of least developed countries (LDCs) and non-LDCs, multilateral trade liberalization have a negative and significant impact on economic exposure to shocks. Interestingly, LDCs appear to experience the highest magnitude of the reducing impact of multilateral trade liberalization on countries’ economic exposure to shocks. Research limitations/implications These findings suggest that a greater cooperation among countries in the world, including among WTO members to further liberalize trade would surely contribute to reducing developing countries’ economic exposure to shocks. Practical implications The current study shows that the current backlash against trade and the consequent strong appeal for domestic trade protectionist measures would likely to undermine the likelihood of further multilateral trade liberalization. One implication of this could be a rise in countries’ economic exposure to shocks. Originality/value To the best of the author’s knowledge, this is first the study on this matter.


2021 ◽  
Author(s):  
Sèna Kimm GNANGNON

Abstract This article has explored the effect of non-reciprocal trade preferences (NRTPs) offered by the QUAD countries to developing countries on the foreign direct investment (FDI) flows to these developing countries. The analysis has used an unbalanced panel dataset of 108 beneficiary countries of NRTPs over the period 2002-2019. By means of the two-step system GMM, it has established that low utilization rates of GSP programs are associated with greater FDI flows to less advanced beneficiary countries, including, least developed countries (LDCs). However, high utilization rates of GSP programs induces greater FDI flows to advanced beneficiary countries, including NonLDCs. In addition, low (high) utilization rates of other trade preferences generate higher FDI flows to less advanced beneficiary countries (relatively advanced countries). The analysis has also shown that GSP programs and other trade preferences are strongly complementary in enhancing FDI inflows, especially for high utilization rates of other trade preferences programs. The utilization of each of these two blocks of NRTPs induces greater FDI flows to countries that endeavour to export increasingly complex products, or those with lower dependence on natural resources. Finally, the utilization of NRTPs generates higher FDI inflows to countries that substantially liberalize their trade regimes. JEL Classification: F13; F14; F20.


2020 ◽  
Vol 6 (1) ◽  
pp. 42
Author(s):  
Maham Zahra Mehdi ◽  
Danish Ahmed Siddiqui

In the last decade, one of the biggest global issues that have been debated upon is whether increased rates of migration, diversity, and political polarization stemming from these factors have any impact on the economic growth of countries. Accordingly, this paper explores the effect of polarization on democracy, social capital, education, and economic growth in a cross-country analysis involving developed countries, developing countries, and the least developed countries. A bilateral time series analysis was conducted by treating each country-set in isolation, as well as a group and focusing on the period 2009 to 2018. According to our results, polarization appears to have a negative effect on the economic growth of developing countries. The same results were observed when we analyzed all the countries collectively. An inverse relationship was also established between polarization and social capital in developed countries. Meanwhile, polarization does not have any significant impact on democracy and education for any of the countries under study. It was also determined that when treated independently, democracy, social capital, education, and GDP per capita all appear to have a varying yet negative effect on polarization.


2017 ◽  
Vol 24 (1) ◽  
pp. 65-81 ◽  
Author(s):  
Nella Hendriyetty ◽  
Bhajan S. Grewal

Purpose The purpose of this paper is to review studies focusing on the magnitude of money laundering and their effects on a country’s economy. The relevant concepts are identified on the basis of discussions in the literature by prominent scholars and policy makers. There are three main objectives in this review: first, to discuss the effects of money laundering on a country’s macro-economy; second, to seek measurements from other scholars; and finally, to seek previous findings about the magnitude and the flows of money laundering. Design/methodology/approach In the first part, this paper outlines the effects of money laundering on macroeconomic conditions of a country, and then the second part reviews the literature that measures the magnitude of money laundering from an economic perspective. Findings Money laundering affects a country’s economy by increasing shadow economy and criminal activities, illicit flows and impeding tax collection. To minimise these negative effects, it is necessary to quantify the magnitude of money laundering relative to economic conditions to identify the most vulnerable aspects of money laundering in a country. Two approaches are used in this study: the first is the capital flight approach, as money laundering will cause flows of money between countries; the second is the economic approach for measuring money laundering through economic variables (e.g. tax revenue, underground economy and income generated by criminals) separately from tax evasion. Originality/value The paper offers new insights for the measurement of money laundering, especially for developing countries. Most methods in quantifying money laundering have focused on developed countries, which are less applicable to developing countries.


2021 ◽  
Vol Volume II (December 2021) ◽  
pp. 1-15
Author(s):  
Sèna Kimm GNANGNON

This article has analysed the effect of development aid flows on poverty volatility in developing countries, including through the economic growth volatility channel. Using a sample of 106 countries over the period 1980-2017, and the two-step system Generalized Methods of Moment (GMM) technique, the analysis has shown that development aid flows dampen the positive poverty volatility effect of economic growth volatility: the magnitude of the negative effect of development aid on poverty volatility rises as the degree of economic growth volatility increases. Additionally, development aid exerts a higher negative effect on poverty volatility as countries face higher poverty rates. These findings highlight the importance of development aid for stabilizing poverty rates.


2021 ◽  
Vol 8 (1) ◽  
pp. 55
Author(s):  
Muslih Faozanudin ◽  
Shainima Islam

People’s mobility and international migration are quite interesting phenomena to discuss. Until now, there are still differences in views between industrialized countries and developing countries regarding the contribution of migration to development for both sending and receiving countries. This paper aims to analyze based on existing secondary data the linkage between migration and sustainable development. For analysis, this study uses a descriptive approach, with secondary data as the primary source. The analysis found that both sending and receiving countries - benefited from population mobility and international migration. The least developed countries in the economy and overall infrastructure are supplying countries for this migration process, and increasing remittances and skilled workers to help other countries. Although it is realized that this condition is the impact of the weak economic system of developing countries on the one hand and the demographic that occur in advanced industrialized countries on the other. To maintain the stability of the supply chain for economic development, international migration is included as one of the sustainable development programs that apply more humane values. Therefore, migrants should be seen as potential contributors to the growth of sending and receiving countries, and some even claim that they are heroes of foreign exchange. Keywords:  migration, remmitance, sustainable development Mobilitas masyarakat dan migrasi internasional merupakan fenomena yang cukup menarik untuk dibahas. sampai saat ini masih terdapat perbedaan pandangan antara negara industri dan negara berkembang, tentang  kontribusi migrasi terhadap  pembangunan, baik  bagi negara yang asal migrant maupun bagi negara penerima. Makalah ini bertujuan untuk menganalisis berdasarkan data sekunder yang ada mengenai keterkaitan antara migrasi dan pembangunan berkelanjutan. Untuk analisis, penelitian ini menggunakan pendekatan deskriptif, dengan data sekunder sebagai sumber primer. Hasil analisis menemukan bahwa kedua negara-negara pengirim dan penerima - mendapat manfaat dari mobilitas penduduk dan migrasi internasional. Negara-negara kurang berkembang dalam ekonomi dan infrastruktur secara keseluruhan menjadi negara pemasok untuk proses migrasi ini, dan meningkatkan pengiriman uang dan pekerja terampil untuk membantu negara lain. Meskipun disadari bahwa kondisi ini merupakan dampak dari lemahnya sistem perekonomian negara berkembang di satu sisi dan faktor demografi dan kesuburan yang terjadi di negara industri maju di sisi lain. Untuk menjaga stabilitas rantai pasokan pembangunan ekonomi, migrasi internasional dimasukkan sebagai salah satu program pembangunan berkelanjutan yang menerapkan nilai-nilai yang lebih manusiawi. Oleh karena itu, para migran harus dilihat sebagai kontributor potensial bagi pertumbuhan negara pengirim dan penerima,  bahkan ada yang mengklaim bahwa mereka adalah sebagai pahlawan devisa. Kata kunci:  migrasi, pembangunan berkelanjutan, remiten


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