Foreign Aid and Revenue: Still a Crowding Out Effect?

Crivelli, Ernesto; Gupta, Sanjeev; Muthoora, Priscilla; Benedek, Dóra

doi:10.5089/9781475505344.001

Cited by 15 publications

(7 citation statements)

References 25 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Gupta et al (2004) find, for a sample of 107 countries in the period 1970-2000 that concessional loans increase domestic revenue, whereas grants are found to be fungible. Crivelli et al (2012) confirm this result for a sample of 118 countries for the period 1980-2009 in a follow-up study. Clist and Morrissey (2011) change this specification slightly and conclude that both grants and loans are encouraging tax effort.…”

Section: Literature Reviewsupporting

confidence: 76%

“…Crivelli et al. () confirm this result for a sample of 118 countries for the period 1980–2009 in a follow‐up study. Clist and Morrissey () change this specification slightly and conclude that both grants and loans are encouraging tax effort.…”

Section: Literature Reviewmentioning

confidence: 68%

“…Therefore, loans are expected to maintain (or even increase) tax revenues, whereas grants can be treated more like free resources and are more likely to substitute for other sources of financing. Gupta et al (2004) and Crivelli et al (2012) confirm this hypothesis and find that concesional loans increase domestic revenues, while grants decrease tax revenues. Clist and Morrissey (2011) change their specification and conclude that both components of aid are increasing tax efforts.…”

Section: The Impact Of Grants and Loansmentioning

confidence: 87%

“…Carter () uses more general methods on the same datasets as Crivelli et al. () and finds no evidence of a negative impact of aid on taxation.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Clist and Morrissey (2011) change this specification slightly and conclude that both grants and loans are encouraging tax effort. Carter (2013) uses more general methods on the same datasets as Crivelli et al (2012) and finds no evidence of a negative impact of aid on taxation.…”

Section: Literature Reviewmentioning

confidence: 99%

See 4 more Smart Citations

The Impact of Aid on Total Government Expenditures: New Evidence on Fungibility

Marc

2016

Review Development Economics

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This study has been prepared within the UNU-WIDER visiting scholar and PhD internship programmes. Terms of use: Documents in Copyright © UNU-WIDER 2015ISSN 1798-7237 ISBN 978-92-9230-895-7 Typescript prepared by the author.UNU-WIDER gratefully acknowledges the financial contributions to the research programme from the governments of Denmark, Finland, Sweden, and the United Kingdom.The World Institute for Development Economics Research (WIDER) was established by the United Nations University (UNU) as its first research and training centre and started work in Helsinki, Finland in 1985. The Institute undertakes applied research and policy analysis on structural changes affecting the developing and transitional economies, provides a forum for the advocacy of policies leading to robust, equitable and environmentally sustainable growth, and promotes capacity strengthening and training in the field of economic and social policy-making. Work is carried out by staff researchers and visiting scholars in Helsinki and through networks of collaborating scholars and institutions around the world.UNU-WIDER, Katajanokanlaituri 6 B, 00160 Helsinki, Finland, wider.unu.eduThe views expressed in this publication are those of the author(s). Publication does not imply endorsement by the Institute or the United Nations University, nor by the programme/project sponsors, of any of the views expressed.Abstract Aid is said to be fungible at the aggregate level if it raises government expenditures by less than the total amount. This happens when the recipient government decreases domestic revenue, decreases net borrowing, or when aid bypasses the budget. This study makes three contributions to both fungibility and fiscal response literature. First, fungibility at the aggregate level is re-examined on a bigger recent panel dataset, distinguishing between short-and longterm impact of aid. The results indicate that aid is partly fungible in the long run and highly fungible in the short run. Second, to account for aid bypassing the budget, technical cooperation is used as a proxy for off-budget aid. Off-budget aid is found to be non-fungible and on-budget aid is partly fungible. Third, fungibility of bilateral and multilateral aid is analysed: the results indicate lower fungibility of multilateral aid.

show abstract

Section: Literature Reviewsupporting

confidence: 76%

Section: Literature Reviewmentioning

confidence: 68%

Section: The Impact Of Grants and Loansmentioning

confidence: 87%

“…Carter () uses more general methods on the same datasets as Crivelli et al. () and finds no evidence of a negative impact of aid on taxation.…”

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 3 more Smart Citations

The Impact of Aid on Total Government Expenditures: New Evidence on Fungibility

Marc

2016

Review Development Economics

View full text Add to dashboard Cite

show abstract

Fiscal Sociology, Political Rents, and Dual Rentierism

Iqtait¹

2022

Funding and the Quest for Sovereignty in Palestine

View full text Add to dashboard Cite

Taxing aid: the end of a paradox?

Caldeira

Geourjon²,

Rota-Graziosi

2019

Int Tax Public Finance

View full text Add to dashboard Cite

Taxing aid was often discussed, but never implemented. This issue has now returned to the fore.First, many developing countries reform their tax system becoming more "reasonable" and eliminating one of the main justifications for aid-related tax exemptions. Second, the International Conference on Financing for Development held in Addis Ababa in August 2015 emphasised domestic revenue mobilisation as the main source of development finance.However, the broadening of tax base faces the proliferation of special tax arrangements, fuelled in part by the tax-exempt status of Official Development Assistance (ODA). Exemptions for project aid could represent as much as 3 percent of gross domestic product (GDP) in countries where tax revenues barely surpass 15 percent of GDP. In addition to loss of tax revenue, tax exemptions for project aid have particularly damaging effects on the formalisation of the economies of recipient countries. Moreover, systematic exemption reduces the credibility of the policies of donor countries and the consistency of their aid policy. Last, the taxation of aid meets the commitment made by donors in the Paris Declaration on Aid Effectiveness (2005) to use recipient countries' national Public Finance Management (PFM) systems. This note reviews tax exemptions of foreign aid-funded projects: their consequences in terms of domestic revenue mobilization in recipient countries, the induced inconsistency of foreign aid policy, their main historical justifications, and recent moves from some donor countries towards the taxation of their aid.

show abstract

Foreign Aid and Revenue: Still a Crowding Out Effect?

Cited by 15 publications

References 25 publications

The Impact of Aid on Total Government Expenditures: New Evidence on Fungibility

The Impact of Aid on Total Government Expenditures: New Evidence on Fungibility

Fiscal Sociology, Political Rents, and Dual Rentierism

Taxing aid: the end of a paradox?

Contact Info

Product

Resources

About