Abed, George, and others, 1998, Fiscal Reforms in Low-Income Countries: Experience Under IMF-Supported Programs, Occasional Paper No. 160 (Washington: International Monetary Fund).
Aguirre, Carlos A., Peter S. Griffith, and M. Zühtu Yücelik, 1981, “Tax Policy and Administration in Sub-Saharan Africa,” Part I, in Taxation in Sub-Saharan Africa, Occasional Paper No. 8, by Fiscal Affairs Department (Washington: International Monetary Fund), pp. 3–41.
- Search Google Scholar
- Export Citation
)| false Aguirre, Carlos A., Peter S. Griffith, and M. Zühtu Yücelik, 1981, “ Tax Policy and Administration in Sub-Saharan Africa,” Part I, in( Taxation in Sub-Saharan Africa, Occasional Paper No. 8, by Fiscal Affairs Department Washington: International Monetary Fund), pp. 3– 41.
Bardhan, Pranab, 1997, “Corruption and Development: A Review of Issues,” Journal of Economic Literature, Vol. 35 (September), pp. 1320–46.
Chand, Sheetal K., and Karl O. Moene, 1997, “Controlling Fiscal Corruption,” IMF Working Paper 97/100 (Washington: International Monetary Fund).
Farhadian-Lorie, Ziba, and Menachem Katz, 1989, “Fiscal Dimensions of Trade Policy,” in Fiscal Policy, Stabilization, and Growth in Developing Countries, ed. by Mario I. Blejer and Ke-young Chu (Washington: International Monetary Fund), pp. 276–306.
Ghura, Dhaneshwar, and Michael T. Hadjimichael, 1996, “Growth in Sub-Saharan Africa,” Staff Papers, International Monetary Fund, Vol. 43 (September), pp. 605–34.
Hamada, Koichi, 1994, “Broadening the Tax Base: The Economics Behind It,” Asian Development Review, Asian Development Bank, Vol. 12 (No. 2), pp. 51–84.
Heller, Peter S., 1975, “A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation,” American Economic Review, Vol. 65 (June), pp. 429–45
Heller, Peter S., 1997, “Strengthening Revenue Mobilization Efforts in Sub-Saharan Africa,” in Deepening Structural Reforms in Africa: Lessons from East Asia, ed. by Laura Wallace (Washington: International Monetary Fund), pp. 39–53.
Khan, Mohsin S., 1987, “Macroeconomic Adjustment in Developing Countries: A Policy Perspective,” World Bank Research Observer, Vol. 2 (January), pp. 23–42.
Leuthold, Jane H., 1991, “Tax Shares in Developing Economies: A Panel Study,” Journal of Development Economics, Vol. 35 (January), pp. 173–85.
Mauro, Paolo, 1996, “The Effects of Corruption on Growth, Investment, and Government Expenditure,” IMF Working Paper 96/98 (Washington: International Monetary Fund).
Musgrave, Richard, 1987, “Tax Reform in Developing Countries,” in The Theory of Taxation for Developing Countries, ed. by David Newbery and Nicholas Stern (New York: Oxford University Press for the World Bank), pp. 242–63.
Nashahibi, Karim, and Stefania Bazzoni, 1994, “Exchange Rate Strategies and Fiscal Performance in Sub-Saharan Africa,” Staff Papers, International Monetary Fund, Vol. 41 (March), pp. 76-122.
Stotsky, Janet G., and Asegedech WoldeMariam, 1997, “Tax Effort in Sub-Saharan Africa,” IMF Working Paper 97/107 (Washington: International Monetary Fund).
Tanzi, Vito, 1977, “Inflation, Lags in Collection, and the Real Value of Tax Revenue,” Staff Papers, International Monetary Fund, Vol. 26 (March), pp. 154–67.
Tanzi, Vito, 1981, “A Statistical Evaluation of Taxation in Sub-Saharan Africa,” Part II in Taxation in Sub-Saharan Africa, Occasional Paper No. 8, by Fiscal Affairs Department (Washington: International Monetary Fund), pp. 45–50.
Tanzi, Vito, 1987, “Quantitative Characteristics of the Tax Systems of Developing Countries,” in The Theory of Taxation for Developing Countries, ed. by David Newbery and Nicholas Stern (New York: Oxford University Press for the World Bank), pp. 205-41.
Tanzi, Vito, 1989, “The Impact of Macroeconomic Policies on the Level of Taxation and the Fiscal Balance in Developing Countries,” Staff Papers, International Monetary Fund, Vol. 36 (September), pp. 633–56.
Tanzi, Vito, 1992, “Structural Factors and Tax Revenue in Developing Countries: A Decade of Evidence,” in Open Economies: Structural Adjustment and Agriculture, ed. by Ian Goldin and L. Alan Winters (New York: Cambridge University Press), pp. 267–85.
Tanzi, Vito, 1998, “Corruption Around the World: Causes, Consequences, Scope, and Cures,” IMF Working Paper 98/63 (Washington: International Monetary Fund).
Tanzi, Vito, and Howell H. Zee, 1997, “Fiscal Policy and Long-Run Growth,” Staff Papers, International Monetary Fund, Vol. 44 (September), pp. 179-209.
I would like to thank Marcel Fafchamps, Menachem Katz, Carlos Leite, Ian Lienert, Joseph Ntamatungiro, Dominique Simard, and Janet Stotsky for useful comments. Yasuyuki Todo contributed to an earlier version of this paper as a summer intern in the IMF’s African Department in 1997.
Nashashibi and Bazzoni (1994) provide an analysis of the trends in revenue and expenditure, as well as economic performance, in the region during 1980–91.
See, for example, Heller (1975), Tanzi (1981, 1987, and 1992), Farhadian-Lorie and Katz (1989), Leuthold (1991), Nashashibi and Bazzoni (1994), and Stotsky and WoldeMariam (1997). Stotsky and WoldeMariam (1997) provide a survey of previous empirical work.
Bardhan (1997) provides a literature review on corruption and development. Mauro (1996) finds evidence of adverse effects of corruption on economic growth. Ghura and Hadjimichael (1996) find evidence to support the positive effects of macroeconomic stability on economic growth in sub-Saharan Africa.
For the oil producers in the sample, tax revenue includes oil revenue from all sources—that is, from oil production sharing between private oil companies and the government, and oil company profits or income taxes.
The variable D includes net bank and nonbank financing, net domestic arrears, and, for simplicity, nontax revenue.
Data on mining shares are incomplete for the set of countries included in this study. To circumvent this problem, two dummy variables are used to represent oil-producing countries (OIL), and non-oil producers whose average share of mining value added in GDP during 1985–95 was greater than or equal to 5 percent of GDP (MINE). The oil producers are Cameroon, Congo, Gabon, and Nigeria. The other mining countries are Botswana, Equatorial Guinea, Guinea, Namibia, Niger, Sierra Leone, Togo, Zambia, and Zimbabwe.
In the empirical literature, the impact of macroeconomic policies on tax revenue has received little attention; the papers by Farhadian-Lorie and Katz (1989) and Nashashibi and Bazzoni (1994) are among the few exceptions.
See Khan (1987) for a general analysis of structural reforms. The effects of these reforms are captured by the use of a dummy variable for countries classified as sustained adjusters, which are considered to have made relatively good progress in implementing structural reforms (see the Appendix).
Four social indicators are used to construct this variable—secondary school enrollment ratio, literacy rate, life expectancy at birth, and the infant survival rate. See the Appendix for a description of the procedure used for the aggregation.
Empirical evidence provided by Mauro (1996) suggests that large economic payoffs can be achieved by reducing corruption.
Data on the level of corruption are available for only 27 of the 39 countries included in the study. See the next section for the methodology used to estimate the data for the countries for which data are missing.
The best equation fit was obtained when the natural logarithm of (1/PCI) was used in the estimation of equation (8).
With a one-period lag used for instruments, one observation is lost per country. Thirty-one countries have data for the full period (1986-96); out of the eight remaining countries, four have data for the period 1987–96, two have data for 1988–96, and two have data for 1989–96. A total of 415 observations are available for the regression estimation.
The instruments used are the contemporaneous, squared, and lagged values of population, population growth, urbanization rate, growth in the terms of trade, agriculture share, the external grants-GDP ratio, the change in external debt-GDP ratio, the external debt-GDP ratio, and growth in the real effective exchange rate. In addition, an index of human capital (HCI), HCI squared, the lagged broad money-GDP ratio, CFA, OIL, and MINE are used.
This procedure is implemented in two steps. First, an instrumental variables technique is used to estimate the regression equation with pooled data. Second, the residuals from this step are used to calculate the standard deviation for each country; the inverse of the country-specific standard deviations are then used to weigh all the included variables (including predicted ones), and the equation is reestimated with the pooled transformed data.
Unless otherwise indicated, data are from the IMF, World Economic Outlook database. The data on tax revenue were obtained from the IMF’s African Department database. See Table 1 for a list of countries included in this study. Angola, Cape Verde, the Democratic Republic of Congo (former Zaire), Eritrea, and Liberia are excluded from the study owing to data limitations.
Infant mortality rate is the number of infants per thousand live births who die before reaching one year of age.
For Namibia and São Tomé and Príncipe, only three out of the four human capital indicators were available. The average of the three transformed indicators is defined as HCI for these two countries. For a few countries, no data were available for one of the two subperiods. In such a case, the value of HCI for the subperiod for which the data were available is used for the other subperiod.