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WP/07/184DeterminantsofTaxRevenueEffortsinDevelopingCountriesAbhijitSenGupta2007InternationalMonetaryFundWP/07/184IMFWorkingPaperAFRDeterminantsofTaxRevenueEffortsinDevelopingCountriesPreparedbyAbhijitSenGupta1AuthorizedfordistributionbyCyrilleBrianonJuly2007AbstractThisWorkingPapershouldnotbereportedasrepresentingtheviewsoftheIMF.
TheviewsexpressedinthisWorkingPaperarethoseoftheauthor(s)anddonotnecessarilyrepresentthoseoftheIMForIMFpolicy.
WorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtofurtherdebate.
Thispapercontributestotheexistingempiricalliteratureontheprincipaldeterminantsoftaxrevenueperformanceacrossdevelopingcountriesbyusingabroaddatasetandaccountingforsomeeconometricissuesthatwerepreviouslyignored.
TheresultsconfirmthatstructuralfactorssuchaspercapitaGDP,agricultureshareinGDP,tradeopennessandforeignaidsignificantlyaffectrevenueperformanceofaneconomy.
Otherfactorsincludecorruption,politicalstability,shareofdirectandindirecttaxesetc.
Thepaperalsomakesuseofarevenueperformanceindex,andfindsthatwhileseveralSubSaharanAfricancountriesareperformingwellabovetheirpotential,someLatinAmericaneconomiesfallshortoftheirrevenuepotential.
JELClassificationNumbers:H11,H20.
Keywords:Revenueperformance,taxes,paneldata.
Author'sE-MailAddress:abhijit@ucsc.
edu1ThispaperwaswrittenduringWinter2005/2006whiletheauthorwasaninterninAFR.
Hewishestothank,withoutimplicating,W.
ScottRogers,JungYeonKim,AbdirakimFarah,MichaelKeen,andChrisGeiregatfortheirusefulguidanceandcomments,andAbhishekBasnyatforableresearchassistance.
2ContentsPageI.
Introduction.
3II.
RecentResearchFindings4III.
DataDescription6IV.
EmpiricalAnalysis.
7A.
GraphicalAnalysis.
7B.
BaselineRegressionAnalysis10C.
PanelCorrectedStandardErrorEstimation15D.
SensitivityAnalysis.
16TestingforEndogeneity.
16DynamicPanelDataModel20SubSampleAnalysis22V.
AssessmentofRevenuePerformance26VI.
PolicyRecommendationsandConclusions.
31References.
33Figures1.
CentralGovernmentRevenueandAgriculture.
72.
CentralGovernmentRevenueandManufacturing83.
CentralGovernmentRevenueandLogofPerCapitaGDP.
84.
CentralGovernmentRevenueandImports.
95.
CentralGovernmentRevenueandPoliticalStability96.
CentralGovernmentRevenueandEconomicStability107.
VariationinRevenuePerformance.
15Tables1.
SummaryofVariables.
62.
DeterminantsofRevenuePerformance(FixedEffectsEstimation)133.
DeterminantsofRevenuePerformance(RandomEffectsEstimation)144.
DeterminantsofRevenuePerformance(CommonCorrelationCoefficient)175.
DeterminantsofRevenuePerformance(PanelSpecificCorrelationCoefficient)186.
DeterminantsofRevenuePerformance(LaggedValuesofForeignAidandDebt)197.
DeterminantsofRevenuePerformance(DynamicPanelSpecification)218.
DeterminantsofRevenuePerformance(Low-IncomeCountries)239.
DeterminantsofRevenuePerformance(Middle-IncomeCountries)2410.
DeterminantsofRevenuePerformance(High-IncomeCountries)2511.
RevenueEffortIndicesforDevelopingCountries(1980–2004)2812.
RevenuePerformanceIndex(Income-BasedClassification)29AppendicesA.
ListofCountries.
35B.
ClassificationofCountriesAccordingtoIncome.
36C.
IllustrativeListofCountriesusedintheRegressions…37D.
SummaryoftheFindingsofPreviousEmpiricalStudies.
393I.
INTRODUCTIONReachingtheMillenniumDevelopmentGoals(MDGs)willrequireaconcertedeffortfrombothdevelopedanddevelopingcountries.
AidfromdevelopedcountrieswillhavetorisesignificantlytoachievetheMDGs.
AlthoughthedonorshavepledgedtoincreasedevelopmentaidbyUS$18.
5billion(froma2002levelofUS$58billion),theWorldBank(2004)estimatesthatdevelopingcountriescouldeffectivelyuseatleastUS$30billioninitially.
Thedevelopedcountriesalsoneedtoaimforimprovedmarketaccessfordevelopingcountries'exportsbyeliminatingtariffsanddomesticsubsidies.
However,becauseexcessiverelianceonforeignfinancingmayinthelongrunleadtoproblemsofdebtsustainability,developingcountrieswillneedtorelysubstantiallyondomesticrevenuemobilization.
Theexperiencewithdomesticresourcemobilizationofdevelopingcountriesoverthelast25yearshasbeenmixed.
IncountriessuchasBotswana,Israel,KuwaitandSeychelles,thecentralgovernmentrevenue'sshareinGDPhasbeenmorethan40percentonaverage.
Ontheotherhand,countriessuchasArgentina,Niger,GuatemalaandBurkinaFasohavestruggledtoraisetheirrevenueabove11percent.
Inthispaperweinvestigatethemainfactorsthatmayexplainthevariationinresourcemobilizationofdevelopingcountries.
Morespecifically,welookatthemaindeterminantsofrevenues(excludinggrants)ofthecentralgovernment,andanalyzetheextenttowhichfactorssuchasgovernmentpolicies,thestructureoftheeconomy,institutionsandthestageofdevelopmentexplaintheirvariation.
Whileanumberofstudieshaveanalyzedtheprincipaldeterminantsoftaxrevenue,inthispaperweextendtheliteraturebyusingabroaderdatasetandcorrectingforsomeoftheeconometricissuesthatwerepreviouslyignored.
Thedatasetisextendedbyusingalargernumberofcountriesoverasufficientlylongtimehorizon.
Moreover,weincorporatenewvariablessuchasspecificsourcesoftaxrevenue,politicalstability,economicstability,lawandorderetc.
aspotentialdeterminantsofrevenueperformance.
Weaddresssomepotentialeconometricproblemsbyemployingeconometricspecificationsthattakeintoaccount,amongotherthings,thepersistenceofrevenueperformanceandthepossibilityofsomeoftheexplanatoryvariablesbeinginfluencedbyrevenueperformance.
OurprincipalfindingsarethatstructuralfactorssuchaspercapitaGDP,shareofagricultureinGDP,andtradeopennessarestrongdeterminantsofrevenueperformance.
Wealsofindthatalthoughforeignaidimprovesrevenueperformance,foreigndebtdoesnothaveasignificanteffect.
Amongtheinstitutionalfactors,wefindthatcorruptionisasignificantdeterminantofacountry'srevenueperformance.
Politicalandeconomicstabilitymattersaswell,butthisfindingisnotrobustacrossspecifications.
Finally,wefindthatthosecountriesthatdependontaxinggoodsandservicesastheirprimarysourceoftaxrevenue,haverelativelypoorrevenueperformance.
Ontheotherhand,countriesthatrelymoreonincometaxes,profittaxes,andcapitalgainstaxes,performmuchbetter.
4Wealsoconstructarevenueperformanceindexthatallowsustocompareactualrevenueperformancewithpredictedrevenueperformance.
WefindthatseveralAfricancountries,includinganumberofcountriesfromSub-SaharanAfrica,performsignificantlybetterthanpredicted.
However,severalcountriesfromLatinAmericaandEasternEuropeperformbelowtheirpredictedrevenueperformance.
Afterreviewingtheliterature,webrieflydescribethedata.
Thenweintroducetheempiricalmodelanddiscussthemaineconometricresults.
Next,wedeveloptherevenueperformanceindexandusethisindextorankcountries.
Toend,weconcludeandmakesomepolicyrecommendations.
II.
RECENTRESEARCHFINDINGSWhataffectsrevenues(measuredastheratiotaxrevenuestoGDP)hasbeenthesubjectofalongdebate.
Beforeturningtotheevidence,wediscussfactorsthataretypicallyincludedinthespecifications.
ResearchershaveincludedseveralvariablessuchaspercapitaGDP,thesectoralcompositionofoutput,thedegreeoftradeandfinancialopenness,theratioofforeignaidtoGDP,theratioofoveralldebttoGDP,ameasurefortheinformaleconomy,andinstitutionalfactorssuchasthedegreeofpoliticalstabilityandcorruptionaspotentialdeterminantsofrevenueperformance.
Percapitaincomeisaproxyfortheoveralldevelopmentoftheeconomyandisexpectedtobepositivelycorrelatedwithtaxshareasitisexpectedtobeagoodindicatoroftheoveralllevelofeconomicdevelopmentandsophisticationoftheeconomicstructure.
Moreover,accordingtoWagner'slaw,thedemandforgovernmentservicesisincome–elastic,sotheshareofgoodsandservicesprovidedbythegovernmentisexpectedtorisewithincome.
Thesectoralcompositionofoutputalsomattersbecausecertainsectorsoftheeconomyareeasiertotaxthanothers.
Forexample,theagriculturesectormaybedifficulttotax,especiallyifitisdominatedbyalargenumberofsubsistencefarmers.
Ontheotherhand,avibrantminingsectordominatedbyafewlargefirmscangeneratelargetaxablesurpluses.
Thedegreeofinternationaltrade—measuredbytheshareofexportsandimports—shouldalsomatterforrevenueperformance.
Importsandexportsareamenabletotaxastheytakeplaceatspecifiedlocations.
Furthermore,mostdevelopingcountriesshiftedawayfromtradetaxesinthe1990s,whichwaslargelyduetothewidespreadliberalizationoftradeundertakenundertheUruguayRound.
Theeffectoftradeliberalizationonrevenuemobilizationmaybeambiguous.
Ifthisliberalizationoccursprimarilythroughreductionintariffsthenoneexpectslossesintariffrevenue.
Ontheotherhand,KeenandSimone(2004)arguerevenuemayincreaseprovidedtradeliberalizationoccursthroughtarifficationofquotas,eliminationsofexemptions,reductionintariffpeaksandimprovementincustomsprocedure.
Rodrik(1998)alsopointsoutthatthereisastrongpositivecorrelationbetweentradeopennessandthesizeofthegovernment,associetiesseemtodemand(andreceive)an5expandedroleforthegovernmentinprovidingsocialinsuranceinmoreopeneconomiessubjecttoexternalrisks.
Thedegreeofexternalindebtednessofacountrymayaffectrevenueperformanceaswell.
Togeneratethenecessaryforeignexchangetoservicethedebt,acountrymaychoosetoreduceimports.
Insuchascenario,importtaxeswillbelower.
Alternatively,thecountrymaychoosetoincreaseimporttariffsorothertaxeswithaviewtogenerateaprimarybudgetsurplustoservicethedebt.
Foreignaidhasalsobeenidentifiedasafactorthatmayaffectrevenueperformance.
Akeydistinctionappearstobewhethertheaidisusedproductivelyorsimplytofinancecurrentconsumptionexpenditures.
Moreover,thecompositionofaidhasanimportanteffectonrevenueperformance.
Forexample,Guptaetal.
(2004)findthatconcessionalloansareassociatedwithhigherdomesticrevenuemobilization,whilegrantshavetheoppositeaffect.
Theempiricalfindingshavebeenmixedbecauseoftheirsensitivitytothesetofcountriesandtheperiodofanalysis.
2Themajorityofthesestudiesemploycrosssectionempiricalmethodsandhenceignoreonthevariationovertime.
LotzandMorss(1967)findthatpercapitaincomeandtradesharearedeterminantsofthetaxshare,andthisfindinghasbeenreplicatedsince(e.
g.
,seePiancastelli(2001)).
Chelliah(1971)relatesthetaxsharetoexplanatoryvariablessuchasminingshare,non-mineralexportratioandagricultureshare.
Severalstudies,includingChelliah,BaasandKelly(1975)andTait,GrtzandEichengreen(1979),updateChelliah(1971)andobtainsimilarresults.
Inarelatedstudycoveringdevelopingcountries,Tanzi(1992)findsthathalfofthevariationinthetaxratioisexplainedbypercapitaincome,importshare,agricultureshareandforeigndebtshare.
Recently,somestudieshavelookedattheimportanceofinstitutionalfactorsindeterminingrevenueperformance.
Forexample,Bird,Martinez-VasquezandTorgler(2004)findfactorssuchascorruption,ruleoflaw,entryregulationsplaykeyroles.
Severalregionalstudieshavelookedintodeterminantsofresourcemobilization.
Forsub-SaharanAfricancountries,Tanzi(1981)findsthatminingandnon-mineralexportsharepositivelyaffectthetaxratio.
Focusingonthesameregion,Leuthold(1991)usespaneldatatofindapositiveimpactfromtradeshare,butanegativeonefromtheshareofagriculture.
Inasimilarstudy,StotskyandWoldeMariam(1997)findthatbothagricultureandminingsharearenegativelyrelatedtothetaxratio,whileexportshareandpercapitaincomehaveapositiveeffect.
TheyalsofindapositivebutweaklinkbetweenIMFprogramsandtaxshare.
Ghura(1998)concludesthatthetaxratioriseswithincomeanddegreeofopenness,andfallswiththeshareofagricultureinGDP.
Healsofindsthatotherfactorslikecorruption,structuralreformsandhumancapitaldevelopmentaffectthetaxratio.
Whilearisein2ThereaderfindsatabulatedsummaryofthesepapersinAppendixD.
6corruptionislinkedwithadeclineintaxratio,structuralreformsandanincreaseinthelevelofhumancapitalisassociatedwithanincreaseintaxratio.
InastudyofArabcountries,Eltony(2002)observesthatminingsharehasanegativeimpactonthetaxratioforoilexportingcountries,butapositiveimpactfornon-oilexportingcountries.
Tosummarize,moststudiesfindthatpercapitaGDPanddegreeofopennessispositivelyrelatedtorevenueperformance,butahigheragriculturesharelowersit.
Theeffectofminingshareandrevenueperformanceisambiguous.
StudiessuchasTanzi(1991)andEltony(2002)foundthatforeigndebtispositivelyrelatedtoresourcemobilization.
III.
DATADESCRIPTIONWeuseapaneldatasetthatcovers105developingcountriesover25years.
Thechoiceofcountriesandyearsisprimarilymotivatedbythedesiretouseconsistentlymeasuredvariables.
Table1givessummarystatisticsofthekeyvariables.
Thevariableofinterestiscentralgovernmentrevenue(excludinggrants)asapercentageofGDP,andistakenfromGovernmentFinancialStatistics(GFS)andWEOEconomicTrendsinAfrica(WETA).
Amongtheexplanatoryvariables,weincludestructuralvariablessuchaspercapitaGDP.
shareofagricultureinGDP,shareofmanufacturinginGDP,shareofimportsinGDP,ratioofdebtandaidtoGDP.
TheirsourcesareprimarilytheInternationalFinancialStatistics(IFS)andWorldDevelopmentIndicators(WDI).
Informationontheproportionoftaxrevenuecollectedfromgoodsandservices,incomeprofitandcapitalgains,andtradecomesfromGFS,andinformationonthehighestmarginaltaxrate(forcorporateandindividualtaxTable1:SummaryoftheVariablesVariableSourceNo.
ofPercentageMeanStd.
DevMinMaxObs.
AvailableCentralgovernmentrevenue(%ofGDP)GFS&2,01367.
119.
813.
2-22579.
33WETAPercapitaGDPinPPPWDI2,58786.
28.
10.
9610.
72Agriculture,valueadded(%ofGDP)WDI2,44881.
621.
814.
5072.
03Imports(%ofGDP)WDI2,55185.
043.
022.
83173.
48Aid(%ofGNI)WDI2,56285.
48.
613.
4-1210.
56Debt(%ofGNI)IFS2,27775.
95.
84.
9080.
76TaxrevenuefromgoodsandGFS75625.
228.
315.
3076.
74services(%oftotalrevenue)Taxrevenuefromincome,profitsGFS73624.
520.
612.
9079.
54andcapitalgains(%oftotalrevenue)Taxrevenuefromtrade(%oftotalrevenue)GFS74724.
916.
514.
2164.
66Taxrevenuefromexports(%oftotalrevenue)GFS2909.
72.
85.
9051.
68Highestmarginaltaxrate,individualrate(%)WDI38612.
931.
013.
3060Highestmarginaltaxrate,corporaterate(%)WDI38512.
828.
38.
8054PoliticalstabilityICRG1,71157.
057.
713.
7990EconomicstabilityICRG1,71157.
031.
07.
4349.
5CorruptionICRG1,72257.
42.
81.
106LawandorderICRG1,68856.
33.
21.
306GovernmentstabilityICRG1,72257.
47.
12.
5012AveragetariffIMF94431.
56.
97.
70457rates)isfromtheWDI.
WeincludetheTradeRestrictivenessIndex,whichhasameasureforaveragetariffsandwhichrankscountriesbasedonnon-tariffbarriersandtariffrates.
Finally,weusevariablesthatcaptureinstitutionalfactorssuchaspoliticalstability,economicstability,corruption,lawandorderandgovernmentstability.
TheseareobtainedfromtheIntraCountryRiskGuide(ICRG)dataset.
Wedefinethosemeasuressuchthatahighernumberimpliesabetterstateoftheworld.
IV.
EMPIRICALANALYSISA.
GraphicalAnalysisBeforeweturntotheregressionresults,webrieflyshowtheobservedrelationshipbetweenrevenueperformanceandsomeexplanatoryvariables(seeFigures1-6).
Afirstobservationisthatagricultureshareappearstohaveastrongnegativerelationshipwithrevenueperformance.
Thereisnoapparentcorrelationbetweenmanufacturingshareandrevenueperformance.
ItalsoappearsthatpercapitaGDPandimportsharehaveastrongpositiverelationshipwithrevenueperformance.
Similarly,politicalandeconomicstabilityappearstronglyrelatedtorevenueperformance.
Figure1:CentralGovernmentRevenueandAgriculture(InpercentofGDP)ZWEZMBVNMVENURYAREUKRTUNTTOTGOTZASWZVINLCASKNLKAZAFSVNSVKSGPSLESYCSENSTPRWAPOLPHLPERPRYPNGPANOMNNGANERNICNAMMOZMARMNGMDAMUSMLTMLIMWIMDGLTULSOLVAKGZKWTKORKENKAZJORJAMIRNINAHKGHNDHTIGNBGINGTMGRDGHAGEOGMBGABFJIETHGNQSLVEGYDOMCZECYPHRVCIVCRICOGCODCOMCOLCHNTCDCAFCPVCMRBDIBFABGRBRABWABOLBENBLZBELBGDBHRARGAGODZAALB010203040500102030405060Averageagricultureshare8Figure3:CentralGovernmentRevenue(%ofGDP)andLogofPerCapitaGDPSLBMACIRLALBDZAAGOARGBHRBGDBELBLZBENBOLBWABRABGRBFABDICMRCPVCAFTCDCHNCOLCOMCODCOGCRICIVHRVCYPCZEDOMEGYSLVGNQETHFJIGABGMBGEOGHAGRDGTMGINGNBHTIHNDHKGINAIRNJAMJORKAZKENKORKWTKGZLVALSOLTUMDGMWIMLIMLTMUSMDAMNGMARMOZNAMNICNERNGAOMNPANPNGPRYPERPHLPOLRWASENSLESGPSVKSVNZAFLKASKNLCAVINSWZTZATGOTTOTUNUKRAREURYVENVNMZMBZWE01020304050678910AveragelogofpercapitaGDPFigure2:CentralGovernmentRevenueandManufacturing(InpercentofGDP)MACZWEZMBVNMVENURYAREUKRTUNTTOTGOTZASWZVINLCASKNLKAZAFSVNSVKSGPSLESYCSENSTPRWAPOLPHLPERPRYPNGPANOMNNGANERNICNAMMOZMARMNGMDAMUSMLTMLIMWIMDGLTULSOLVAKGZKWTKORKENKAZJORJAMIRNINAHKGHNDGNBGINGTMGRDGHAGEOGMBGABFJIETHGNQSLVEGYDOMCZECYPHRVCIVCRICOGCODCOMCOLCHNTCDCAFCPVCMRBDIBFABGRBRABWABOLBENBLZBELBGDBHRARGAGODZAALB01020304050010203040Averagemanufacturingshare9Figure4:CentralGovernmentRevenueandImports(InpercentofGDP)SLBMACIRLALBDZAAGOARGBHRBGDBELBLZBENBOLBWABRABGRBFABDICMRCPVCAFTCDCHNCOLCOMCODCOGCRICIVHRVCYPCZEDOMEGYSLVGNQETHFJIGABGMBGEOGHAGRDGTMGINGNBHTIHNDHKGINAIRNJAMJORKAZKENKORKWTKGZLVALSOLTUMDGMWIMLIMLTMUSMDAMNGMARMOZNAMNICNERNGAOMNPANPNGPRYPERPHLPOLRWASTPSENSYCSLESVKSVNZAFLKASKNLCAVINSWZTZATGOTTOTUNUKRAREURYVENVNMZMBZWE01020304050020406080100120AverageimportshareFigure5:CentralGovernmentRevenue(%ofGDP)andPoliticalStabilityALBDZAAGOARGBHRBGDBELBOLBWABRABGRBFACMRCHNCOLCODCOGCRICIVHRVCYPCZEDOMEGYSLVETHGABGMBGHAGTMGINGNBHTIHNDHKGINAJAMJORKAZKENKORKWTLVALTUMDGMWIMLIMLTMDAMNGMARMOZNAMNICNERNGAOMNPANPNGPRYPERPHLPOLSENSLESGPSVKSVNZAFLKATZATGOTTOTUNUKRAREURYVENVNMZMBZWEIRL0102030405025354555657585Averagepoliticalstability10B.
BaselineRegressionAnalysisInourbaselinepanelregressionsweusefixedandrandomeffectsspecifications.
Thefixedeffectassumesthatcertaincountry-specificcharacteristicsarenotcapturedbytheexplanatoryvariables,andthattheseareuncorrelatedwiththeerrorterm.
ThefixedeffectspecificationisititititiitZYXyεδγβα++++=.
.
.
,whereityisatheratioofcentralgovernmentrevenue(excludinggrants)toGDPincountryiduringperiodt,iαisthecountryfixedeffect,itXissetofstructuralvariables,andthevectorsitYanditZincludeinstitutionalandpolicyvariables.
Alternatively,therandomeffectsspecificationis`,.
.
.
itiitititituZYXyεδγβα+++++=withiutherandomeffect.
ThestructuralvariablesincludethelogofpercapitaGDP,theshareofagricultureinGDP,theratioofimportstoGDP,shareofaidanddebtinGDP.
Theinstitutionalvariablesincludecorruption,lawandorder,governmentstability,politicalstabilityandeconomicstability.
Figure6:CentralGovernmentRevenue(%ofGDP)andEconomicStabilityIRLALBDZAAGOARGBHRBGDBELBOLBWABRABGRBFACMRCHNCOLCODCOGCRICIVHRVCYPCZEDOMEGYSLVETHGABGMBGHAGTMGINGNBHTIHNDHKGINAJAMJORKAZKENKORKWTLVALTUMDGMWIMLIMLTMDAMNGMARMOZNAMNICNERNGAOMNPANPNGPRYPERPHLPOLSENSLESGPSVKSVNZAFLKATZATGOTTOTUNUKRAREURYVENVNMZMBZWE0102030405015202530354045Averageeconomicstability11Finally,thepolicyvariablesincludethevarioussourcesoftaxrevenueasapercentageofrevenue,thehighestcorporateandincometaxrate,andaveragetariffs.
Theresultsofthebaselineregressions,usingthefixed-andrandom-effectsspecifications,aresummarizedinTables2and3.
Wherevernecessary,theregressionsalsoincludedummiesforlandlockedandresource-richcountries.
3Thestandarderrorsareadjustedforintra-groupcorrelations.
BecauseofthehighdegreeofcollinearitybetweentheagricultureshareandthelogofGDPpercapita(R2=0.
81),weusethosevariablesinseparatespecifications.
AfirstfindingisthatcoefficientonlogofpercapitaGDPissignificantlypositiveinalltherandom-effectsregressionsandinmostfixed–effectsspecifications.
Thisisinlinewithotherstudiesthatfoundthatthecapacitytocollectandpaytaxesincreaseswiththelevelofdevelopment(seeforexampleChelliah,1971).
Ourresultsalsosuggestastrongnegativeandsignificantrelationshipbetweenagricultureshareandrevenueperformance.
Forexample,aonepercentincreaseintheshareofagriculturesectorcouldreducerevenueperformancebyasmuchas0.
4percent.
Thisrelationshipcouldworkthroughboththesupplyandthedemandside.
Onthesupplyside,ifalargepartoftheagriculturesectorissubsistence,thenthissectormaybehardtotax.
Moreover,itmaybepoliticallyinfeasibletotaxtheagriculturesector.
Ontheotherhand,alargeagriculturesectormayreducetheneedtospendonpublicgoodsandservices,whichtendtoberelativelyurban-based.
Next,inmostspecificationswefindastrongpositiverelationshipbetweenopennessandrevenueperformance.
Forexample,anincreaseintheratioofimportstoGDPofonepercentmayincreaserevenueperformancebyupto0.
15percent.
Oneexplanationforthisfindingisthattrade-relatedtaxesareeasiertoimposebecausethegoodsenterorleavethecountryatspecifiedlocations.
Wealsofindthatforeignaidhasapositiveeffectonrevenueperformance,buttherelationshipappearsweakerthanthatforsomeothervariables.
Guptaetal.
(2004)hadalreadypointedoutthatifforeignaidcomesprimarilyintheformofloans,thentheburdenoffutureloanrepaymentsmayinducepolicymakerstomobilizehigherrevenues.
However,aidintheformofgrantsmaycreatedamoralhazardproblemifitdecreasesincentivestoincreasethetaxbase.
Wefoundthatdebtisnegativelyrelatedwithrevenueperformance,althoughtherelationshipisnotverystrong.
Ourresultsfortheinstitutionalfactorsaremixed.
Wedonotfindasignificanteffectfromthevariablesthatcapturegovernmentstability,corruption,andlawandorder.
However,across3Thedummyvariableforresourcerichcountriestakesonvalue1iftheshareofmineralsandoresinthehostcountry'sexportsexceeds50percentorifthehostisanoilexportingcountry.
12somespecification,theimpactissignificantwheninstitutionsaremeasuredbypoliticalandeconomicstability.
WealsoinvestigatehowthevarioussourcesoftaxrevenuesaffecttheshareofcentralgovernmentrevenueinGDP.
Wefindthatcountriesthatrelymoreontaxesongoodsandservicesasasourceofrevenuehavelowerrevenueperformance.
Sincemostofthetaxesongoodsandservicesareindirecttaxes,theytendtoberegressiveinnature.
Asaresult,theymayexacerbatetheinequalityinincomedistributionandreducethetaxbase,whichinsomecasesmayresultinareductionintheshareofrevenueinGDP.
Incontrast,greaterrelianceontaxationofincome,profitsandcapitalgainsappearstoimproverevenueperformance.
Totheextentthatthesetaxesareprogressive,theyreduceincomedispersionandgeneratehigherrevenue.
Wealsofindthattheshareoftaxrevenuefromtradedoesnotaffectrevenueperformancesignificantly.
Finally,revenueperformancedoesnotappeartobedeterminedsignificantlybycorporateandindividualtaxrates,orbyaveragetariffs,oncewehavetakenintoaccountthestructuralvariables,institutionalvariablesandvarioussourcesoftaxrevenue.
Asaresult,wedropthesevariablesfromsubsequentanalysis.
44Thebaselineaswellasthepanelcorrectedstandarderrorregressions(seebelow)includedotherexplanatoryvariablesthatwerenotfoundtobesignificantandwerehencedropped.
Theseincludedstructuralvariablessuchasshareofmanufacturing,exportshare,extentofmonetization,degreeofurbanization;institutionalvariablessuchasexchangeratestabilityandliteracy;andpolicyvariablessuchasstandardVATrates.
13Table2:DeterminantsofRevenuePerformance(FixedEffectsEstimation)(I)(II)(III)(IV)(V)(VI)(VII)(VIII)(IX)(X)(XI)(XII)(XIII)(XIV)(XV)(XVI)Constant-16.
741-24.
405-35.
508-2.
97-4.
949-7.
932.
013-20.
32928.
667*32.
733*32.
159*14.
531*2.
09914.
814*14.
740*5.
245[1.
09][1.
25][1.
49][0.
20][0.
16][0.
45][0.
14][0.
58][5.
30][4.
00][3.
41][5.
56][0.
52][7.
31][5.
70][1.
01]LogPCGDP4.
544**5.
169**6.
519**2.
1791.
1122.
3581.
5653.
156[2.
36][2.
12][2.
14][1.
14][0.
31][1.
12][0.
81][0.
74]Agri.
share-0.
415+-0.
501+-0.
525+-0.
0610.
088-0.
159**-0.
0550.
067[1.
74][1.
71][1.
66][1.
01][0.
71][2.
54][0.
90][0.
71]Importshare0.
063+0.
053+0.
0350.
156+0.
106*0.
0320.
122+-0.
05-0.
0370.
0350.
185**0.
085**0.
0320.
131+[1.
92][1.
72][1.
27][2.
02][2.
70][1.
09][1.
80][1.
04][0.
63][1.
12][2.
14][2.
38][1.
01][1.
76]Aidshare0.
0760.
113+0.
0380.
0760.
116**0.
057-0.
0010.
138**0.
0340.
080.
131**0.
045[1.
10][2.
00][0.
32][1.
24][2.
19][0.
52][0.
01][2.
35][0.
27][1.
33][2.
30][0.
41]Debtshare0.
051-0.
082**-0.
1570.
031-0.
077+-0.
150+0.
092-0.
095**-0.
1270.
041-0.
086+-0.
139[0.
63][2.
04][1.
16][0.
45][1.
82][1.
81][1.
13][2.
03][0.
86][0.
59][1.
76][1.
45]Govt.
stability0.
0640.
1950.
0880.
247[0.
68][1.
53][1.
04][1.
68]Corruption0.
306-0.
1570.
239-0.
116[0.
93][0.
71][0.
74][0.
48]Lawandorder0.
0410.
0450.
108-0.
124[0.
15][0.
11][0.
42][0.
25]Politicalstability-0.
0060.
0170.
03100.
0250.
025[0.
25][0.
61][1.
30][0.
02][1.
02][0.
83]Economicstability0.
102+0.
0310.
0140.
0860.
0220.
022[1.
64][0.
72][0.
23][1.
30][0.
50][0.
33]TaxonG&S-0.
018-0.
014-0.
02-0.
026-0.
005-0.
035-0.
011-0.
046[0.
54][0.
18][0.
65][0.
61][0.
16][0.
45][0.
35][1.
05]TaxonIPC0.
0450.
218*0.
0410.
223*0.
0540.
207**0.
0460.
228**[1.
03][3.
07][1.
16][3.
29][1.
26][2.
56][1.
39][2.
72]Taxontrade0.
0540.
0250.
034-0.
0040.
0690.
0320.
0440.
005[0.
99][0.
37][0.
63][0.
10][1.
29][0.
63][0.
81][0.
14]Avg.
tariff-0.
169+-0.
112-0.
195**-0.
103[1.
53][1.
10][2.
14][1.
15]Corporatetax0.
0860.
0570.
0780.
033[0.
84][0.
61][0.
80][0.
29]Individualtax-0.
015-0.
009-0.
009-0.
009[0.
61][0.
27][0.
35][0.
26]Observations1875184516373877110294027518241810165837869101639373Numberofcountries105104945132725334103102945131715333R-squared0.
0180.
0280.
0410.
0830.
4450.
0940.
070.
4810.
0480.
0540.
0620.
090.
4690.
1150.
0750.
477Note:Robustzstatisticsinbrackets.
+significantat10%;**significantat5%;*significantat1%.
14(I)(II)(III)(IV)(V)(VI)(VII)(VIII)(IX)(X)(XI)(XII)(XIII)(XIV)(XV)(XVI)Constant-15.
076-17.
174-24.
261+-13.
8645.
723-12.
181-9.
0219.
05227.
180*26.
241*25.
071*16.
091*10.
191*14.
493*16.
538*11.
485**[1.
44][1.
52][1.
76][1.
42][0.
56][1.
14][0.
97][0.
94][8.
86][6.
05][4.
87][5.
81][2.
98][5.
93][5.
75][2.
41]LogPCGDP4.
228*4.
017*4.
756*3.
480*0.
6332.
725**2.
957*0.
257[3.
39][2.
99][2.
87][3.
24][0.
57][2.
38][2.
71][0.
20]Agri.
share-0.
394**-0.
401**-0.
412**-0.
138**-0.
029-0.
183*-0.
127**-0.
056[2.
28][2.
18][1.
98][2.
27][0.
34][3.
32][2.
11][0.
80]Importshare0.
084*0.
085*0.
049**0.
150*0.
113*0.
0410.
121*0.
0230.
0420.
053+0.
159*0.
091*0.
0440.
122*[2.
90][3.
07][2.
02][2.
92][3.
10][1.
61][2.
76][0.
69][1.
16][1.
78][2.
95][2.
77][1.
48][2.
88]Aidshare0.
0680.
091+0.
1010.
0690.
102**0.
1270.
0110.
113**0.
0820.
0740.
121**0.
118[1.
03][1.
74][0.
95][1.
14][2.
05][1.
23][0.
12][2.
08][0.
87][1.
26][2.
27][1.
29]Debtshare0.
075-0.
06-0.
0510.
044-0.
062-0.
0890.
071-0.
067-0.
0420.
053-0.
069-0.
086[0.
97][1.
41][0.
48][0.
66][1.
42][1.
10][0.
79][1.
28][0.
39][0.
78][1.
30][1.
10]Govt.
stability0.
0510.
2160.
0470.
217[0.
55][1.
41][0.
52][1.
37]Corruption0.
382-0.
1540.
35-0.
149[1.
17][0.
63][1.
09][0.
65]Lawandorder0.
001-0.
2570.
07-0.
263[0.
01][0.
81][0.
28][0.
75]Politicalstability-0.
0090.
0160.
044**-0.
0030.
0220.
038+[0.
38][0.
59][2.
00][0.
12][0.
90][1.
69]Economicstability0.
108+0.
0350.
0080.
090.
03-0.
003[1.
63][0.
80][0.
12][1.
39][0.
70][0.
04]TaxonG&S-0.
041-0.
113*-0.
045-0.
116*-0.
027-0.
100**-0.
034-0.
107*[1.
15][3.
02][1.
50][3.
58][0.
68][2.
34][0.
99][3.
28]TaxonIPC0.
0630.
161*0.
050.
136*0.
074+0.
150*0.
059+0.
132*[1.
53][2.
86][1.
44][2.
70][1.
82][2.
60][1.
76][2.
62]Taxontrade0.
036-0.
070+0.
018-0.
087**0.
036-0.
0620.
02-0.
080**[0.
71][1.
73][0.
36][2.
07][0.
76][1.
60][0.
41][2.
05]Avg.
tariff-0.
149-0.
055-0.
181+-0.
072[1.
52][0.
57][1.
73][0.
63]Corporatetax0.
140.
1050.
147+0.
117[1.
61][1.
38][1.
95][1.
58]Individualtax-0.
038-0.
033-0.
03-0.
019[0.
98][0.
87][0.
67][0.
48]Observations1,8751,8451,637387711,029402751,8241,8101,658378691,01639373Numberofcountries105104945132725334103102945131715333Note:Robustzstatisticsinbrackets.
+significantat10%;**significantat5%;*significantat1%.
Table3:DeterminantsofRevenuePerformance(RandomEffectsEstimation)15C.
Panel-CorrectedStandardErrorEstimationMostofthepreviousempiricalanalysesdidnotconsiderthatrevenueperformancetendstobehighlypersistentovertime(Leuthold(1991)isanexception).
ThispersistenceisillustratedinFigure7forasubsetofthecountriesinourdataset.
Inthepresenceofserialcorrelation,theempiricalmodelbecomesitiitititituZYXyεδγβα+++++=.
.
.
,whereititiitv+=1.
ερε.
Aftertestingforfirst-orderserialcorrelationintheresidualswithaWooldridgetest,weestimatethemodelusingpanel-correctedstandarderrorestimates(PCSE).
5ThePCSEusesPrais-Winstenregression,andassumesthatthedisturbancesareheteroskedasticandcontemporaneouslycorrelatedacrosspanels.
ItcanbeusedinthepresenceofanAR(1)withacommoncoefficientacrossallthepanels(ii=,ρρ),andalsowithspecificcoefficientforeachpanel(jiji≠≠,ρρ).
Whenautocorrelationwithacommoncoefficientofcorrelationisspecified,thecommoncorrelationcoefficientiscomputedasmmρρρρρ++++=.
.
.
.
.
.
.
321,Inthisexpression,iρistheestimatedautocorrelationcoefficientforpaneliandmisthenumberofpanels.
5WeusedxtserialroutineinStata9.
1totestforserialcorrelation.
Thenullofnofirstorderserialcorrelationisrejectedatthe1percentlevelacrossallspecifications.
Figure7:VariationinRevenuePerformanceARGBENBFAGTMHUNINAJORKENKORMUSNERPANPERLKA01020304050601980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004YearsShareofRevenueinGDP16AlthoughthePCSEestimatesyieldslargerstandarderrors,theresultsaresimilartothebaselineresults(seeTables4and5).
Asbefore,revenueperformanceincreaseswithpercapitaGDPandimportshare,anddeclineswithagricultureshareinGDP.
Theimpactofforeignaidisnowstronger,especiallywhentheautocorrelationprocessisdifferentforeachpanel.
Inthiscontext,ananticipatedincreaseinaidfromaroundUS$80billionin2004toUS$130billionin2010wouldincreaserevenueperformancebyasmuchas0.
6percent.
Amongtheinstitutionalfactors,corruptionhasasignificantlyadverseeffectonrevenueperformance(confirmingtheresultbyGhura(1999)).
Politicalandeconomicstabilityaresignificantonlyforsomespecifications,justlikeinthebaselineestimations.
Wealsoconfirmourearlierfindingsthatrevenueperformanceincountrieswithheavyrelianceontaxesfromgoodsandservicesisweaker,itisbetterforthosecountriesthatrelymoreontaxesfromincome,profitsandcapitalgains.
Finally,relativelyhighrelianceontaxrevenuefromtraderemainsassociatedwithpoorrevenueperformance,butthisfindingisnotrobustacrossspecifications.
D.
SensitivityAnalysisTestingforEndogeneityCountriesthatfinditdifficulttomobilizerevenuefromdomesticsourceswouldbeexpectedtorelymoreheavilyonforeignaidanddebtasasourceofrevenue.
Therefore,therecanbeanendogeneityproblemamongforeignaid,debtandrevenueperformance.
Toallowforthisendogeneity,were-estimatethespecificationspresentedincolumnsIII-VIandIX-XIIofTables4and5withlaggedvaluesofaidshareanddebtshare,insteadofcontemporaneousvalues.
TheresultsaregiveninTable6.
Itappearsthatendogeneityisnotasevereproblem,becausethefindingsinTable6remainsimilartotheearlierresults.
Whiledebtcontinuestobeweaklyrelatedtorevenueperformance,foreignaidhasapositiveandsignificantimpactonrevenueperformance(particularlyforthecasewherecountrieshavedifferentdegreesofpersistenceinrevenueperformance).
Wealsoseethatthesourcesoftaxrevenuearestrongdeterminantsofrevenueperformance,sincethecoefficientontheshareoftaxesfromgoodsandservices,aswellasthatfromincome,profitsandcapitalgainsaresignificantacrossallspecifications.
17(I)(II)(III)(IV)(V)(VI)(VII)(VIII)(IX)(X)(XI)(XII)Constant-4.
9-5.
996-10.
279**-8.
269-12.
568*-7.
2826.
170*23.
818*22.
735*17.
201*15.
784*16.
988*[0.
99][1.
45][2.
08][1.
30][3.
14][1.
24][27.
03][17.
02][18.
68][8.
62][8.
53][7.
26]LogPCGDP3.
065*2.
692*3.
120*2.
650*2.
814*2.
401*[5.
32][5.
40][5.
14][3.
87][5.
39][3.
45]Agri.
share-0.
313*-0.
315*-0.
335*-0.
210*-0.
225*-0.
197*[7.
07][7.
51][7.
86][4.
69][7.
30][4.
47]Importshare0.
092*0.
099*0.
108*0.
129*0.
103*0.
052*0.
080*0.
089*0.
112*0.
088*[6.
75][6.
32][5.
64][6.
67][5.
40][2.
66][5.
14][4.
72][6.
49][4.
74]Aidshare0.
0210.
0440.
0050.
078+0.
0360.
0550.
0240.
088**[0.
65][1.
05][0.
28][1.
77][1.
48][1.
40][1.
08][2.
09]Debtshare-0.
003-0.
0540.
001-0.
077+-0.
028-0.
057+-0.
013-0.
084**[0.
09][1.
36][0.
02][1.
93][1.
09][1.
87][0.
52][2.
52]Govt.
stability0.
019-0.
003[0.
20][0.
04]Corruption0.
695**0.
650**[2.
29][2.
18]Lawandorder0.
0840.
245[0.
50][1.
50]Politicalstability0.
0180.
060+0.
0110.
053+[0.
75][1.
91][0.
45][1.
81]Economicstability0.
063+0.
0170.
0520.
007[1.
70][0.
41][1.
41][0.
14]TaxonG&S-0.
116*-0.
125*-0.
105*-0.
122*[3.
67][4.
14][3.
50][4.
18]TaxonIPC0.
149*0.
148*0.
136*0.
136*[4.
68][5.
20][5.
08][5.
54]Taxontrade-0.
050+-0.
048+-0.
044-0.
041[1.
73][1.
74][1.
46][1.
39]Observations1,8751,8451,6373871,0294021,8241,8101,6583781,016393Numberofcountries1051049451725310310294517153Note:Robustzstatisticsinbrackets.
+significantat10%;**significantat5%;*significantat1%.
Table4:DeterminantsofRevenuePerformance(CommonCorrelationCoefficient)18(I)(II)(III)(IV)(V)(VI)(VII)(VIII)(IX)(X)(XI)(XII)Constant-13.
699*-18.
533*-17.
326*-17.
288*-19.
416*-22.
642*30.
308*26.
217*23.
969*18.
108*17.
558*16.
873*[2.
91][4.
03][4.
21][3.
03][6.
18][4.
41][21.
69][15.
47][17.
09][13.
70][9.
88][7.
36]LogPCGDP4.
425*4.
260*3.
887*3.
815*3.
521*4.
177*[8.
14][7.
70][7.
09][5.
98][8.
93][6.
82]Agri.
share-0.
362*-0.
351*-0.
353*-0.
191*-0.
286*-0.
203*[8.
11][8.
59][8.
89][5.
07][9.
35][5.
61]Importshare0.
119*0.
119*0.
105*0.
136*0.
098*0.
076*0.
092*0.
122*0.
128*0.
103*[7.
64][7.
38][5.
12][7.
08][5.
43][3.
51][6.
45][7.
66][7.
77][6.
18]Aidshare0.
044+0.
081**0.
031+0.
094*0.
068**0.
0550.
052**0.
096*[1.
63][2.
37][1.
93][3.
20][2.
34][1.
64][2.
28][2.
91]Debtshare0.
024-0.
040.
039-0.
047-0.
037-0.
0540.
01-0.
078**[0.
65][1.
03][1.
05][1.
23][1.
16][1.
57][0.
33][2.
09]Govt.
stability-0.
008-0.
106[0.
11][1.
18]Corruption0.
288+0.
665*[1.
67][2.
70]Lawandorder-0.
0310.
078[0.
20][0.
44]Politicalstability0.
020.
0260.
0030.
044[0.
90][1.
11][0.
14][1.
57]Economicstability0.
088**0.
0350.
0560.
026[2.
22][1.
17][1.
42][0.
76]TaxonG&S-0.
101*-0.
094*-0.
130*-0.
131*[3.
79][3.
71][4.
47][4.
12]TaxonIPC0.
152*0.
151*0.
134*0.
143*[6.
35][6.
66][5.
88][7.
31]Taxontrade0.
0090.
018-0.
033-0.
021[0.
29][0.
59][1.
07][0.
72]Observations1,8751,8451,6373871,0294021,8241,8101,6583781,016393Numberofcountries1051049451725310310294517153Note:Robustzstatisticsinbrackets.
significantat10%;**significantat5%;*significantat1%.
Table5:DeterminantsofRevenuePerformance(PanelSpecificCorrelationCoefficient)19(I)(II)(III)(IV)(V)(VI)(VII)(VIII)(IX)(X)(XI)(XII)(XIII)(XIV)(XV)(XVI)Constant-14.
697*-8.
454-12.
806*-6.
72121.
044*17.
191*15.
906*17.
049*-23.
158*-16.
701*-18.
568*-22.
012*22.
502*18.
071*17.
310*17.
539*[4.
02][1.
49][3.
24][1.
25][21.
61][8.
56][8.
61][7.
49][6.
68][2.
86][5.
60][3.
89][24.
27][15.
43][9.
32][9.
14]LogPCGDP3.
614*2.
653*2.
835*2.
357*4.
581*3.
767*3.
372*4.
165*[7.
75][4.
31][5.
48][3.
58][9.
64][5.
65][7.
91][6.
14]Agri.
share-0.
273*-0.
213*-0.
228*-0.
202*-0.
335*-0.
191*-0.
287*-0.
199*[7.
95][4.
61][7.
59][4.
39][9.
61][4.
93][8.
98][5.
44]Importshare0.
094*0.
098*0.
120*0.
092*0.
078*0.
080*0.
099*0.
077*0.
113*0.
099*0.
133*0.
086*0.
094*0.
113*0.
116*0.
094*[6.
34][5.
19][5.
83][4.
85][5.
80][4.
38][5.
47][4.
41][7.
42][4.
99][6.
68][5.
11][6.
94][7.
20][6.
42][5.
95]Aidshare0.
034**0.
0350.
0240.
063+0.
0170.
059+0.
047**0.
089**0.
043*0.
063*0.
028+0.
071*0.
033+0.
049+0.
067*0.
075*[2.
10][1.
08][1.
25][1.
80][1.
13][1.
77][2.
49][2.
48][2.
64][2.
59][1.
70][3.
11][1.
79][1.
66][3.
01][2.
72]Debtshare0.
0340.
0350.
0450.
0170.
040+0.
0150.
02900.
050.
0270.
073+0.
0190.
0330.
0260.
0350.
008[1.
41][0.
95][1.
59][0.
47][1.
81][0.
48][1.
20][0.
01][1.
60][0.
80][1.
93][0.
57][1.
21][0.
83][1.
20][0.
28]Govt.
stability0.
0310.
0110.
021-0.
063[0.
34][0.
12][0.
27][0.
74]Corruption0.
744**0.
694**0.
2860.
673*[2.
38][2.
30][1.
16][2.
58]Lawandorder0.
0490.
185-0.
0740.
034[0.
29][1.
08][0.
43][0.
19]Politicalstability0.
0180.
059+0.
010.
052+0.
0220.
0330.
0050.
042+[0.
75][1.
88][0.
44][1.
74][1.
05][1.
39][0.
24][1.
65]Economicstability0.
059+0.
0140.
0490.
0090.
087**0.
0180.
0640.
005[1.
66][0.
34][1.
36][0.
19][2.
20][0.
59][1.
63][0.
14]TaxonG&S-0.
117*-0.
125*-0.
105*-0.
123*-0.
105*-0.
099*-0.
126*-0.
122*[3.
51][3.
84][3.
26][3.
92][3.
64][3.
69][4.
32][3.
80]TaxonIPC0.
138*0.
136*0.
124*0.
126*0.
141*0.
134*0.
115*0.
125*[4.
22][4.
69][4.
40][5.
04][6.
23][6.
18][5.
48][8.
46]Taxontrade-0.
047-0.
046-0.
042-0.
0380.
0110.
032-0.
031-0.
016[1.
57][1.
61][1.
37][1.
27][0.
37][1.
06][1.
22][0.
64]Observations1,5623851,0214001,5843761,0103911,5623851,0214001,5843761,010391Numberofcountries94517253945171539451725394517153Note:Robustzstatisticsinbrackets.
significantat10%;**significantat5%;*significantat1%.
CommonCorrelationCoefficientPanelSpecificCorrelationCoefficientTable6:DeterminantsofRevenuePerformance(LaggedValuesofForeignAidandDebt)20DynamicPanelDataInsteadofallowingforserialcorrelationintheerrorterm,theeconometricspecificationcouldalsocapturethepersistenceinrevenueperformance(describedinSectionIV.
C)byincludingthelaggedvalueofthedependentvariable.
Becausethelaggeddependentvariableiscorrelatedwiththeerrorterm,itiswellknownthatthiscreatessomeestimationproblems.
Toovercometheseproblems,ArellanoandBond(1991)proposedageneralizedmethod-of-momentsestimatorusinglaggedlevelsofthedependentvariableandthepredeterminedvariablesanddifferencesofstrictlyexogenousvariables.
Thismethodisreferredtoasdifference-GMM.
AproblemwiththeoriginalArellano-Bondestimatoristhatlaggedlevelsofvariablesmaybepoorinstrumentsifthosevariablesarehighlypersistent.
Insuchcases,ArellanoandBover(1995)andBlundellandBond(1998)describehowadditionalmomentconditionscanincreaseefficiency.
Thisprocedureisreferredtoassystem-GMM.
Table7reportstheresultsfromthedynamicpanelmethods.
6Ourresultsconfirmthatlaggedrevenueshareisastrongandsignificantpredictorofcurrentrevenueperformance,acrossbothdifference-andsystem-GMM.
Overall,theresultsfromthedifference-GMMarequiteweak,andonlyagricultureshare,aidshareanddebtsharearesignificantpredictorsofrevenueperformance.
However,onceweusesystem-GMMtotakeintoaccountthenearrandomwalkofrevenueperformance,theresultsarebroadlysimilartothebaselineresults.
Lookingatcolumns(V)to(VIII)inTable7wefindthatpercapitaGDP,agricultureshareandimportsharearesignificantpredictorofrevenueperformance.
However,theimpactofpercapitaGDPissubstantiallysmallerinthedynamicspecification.
Theimpactofagricultureshareandimportsharearealsomarginallysmallerinthedynamicspecification.
Bothforeignaidshareanddebtsharesignificantlyaffecttherevenueperformance.
Whileaidsharehasapositiveimpact,ahigherdebtshareisassociatedwithalowerrevenueperformance.
Finally,asinthebaselinespecification,shareofrevenuefromtaxinggoodsandservicesisnegativelyrelatedtorevenueperformance,whileshareofrevenuefromincome,profitandcapitalgainshasapositiveimpact.
6ThedifferenceGMMestimationsusedthextabondroutineinStata9.
1,andthesystemGMMestimationsusedthextabond2routine.
Theshareofaidandtheshareofdebtwereconsideredtobeendogenousvariables.
21(I)(II)(III)(IV)(V)(VI)(VII)(VIII)Constant-0.
068-0.
063-0.
051-0.
035-5.
349**-5.
051**9.
038*6.
126*[0.
98][0.
86][0.
68][0.
47][2.
11][1.
99][3.
44][2.
96]Revenueshare(Lag)0.
361*0.
325*0.
361*0.
337*0.
815*0.
795*0.
714*0.
721*[4.
98][4.
22][5.
09][4.
30][12.
71][11.
10][7.
15][7.
33]LogPCGDP1.
901-0.
0710.
927*0.
786**[0.
93][0.
03][2.
67][2.
31]Agri.
share-0.
110+-0.
103+-0.
137*-0.
101*[1.
79][1.
72][3.
53][3.
30]Importshare0.
0520.
0510.
0460.
0470.
036**0.
038**0.
038+0.
038**[1.
44][1.
32][1.
16][1.
14][2.
43][2.
41][1.
81][2.
10]Aidshare0.
096**0.
098**0.
113**0.
109**0.
072+0.
074+0.
104*0.
078**[2.
08][2.
27][2.
50][2.
46][1.
93][1.
82][2.
94][2.
04]Debtshare-0.
098*-0.
093*-0.
103*-0.
100**-0.
117**-0.
125*-0.
160*-0.
138*[3.
21][2.
81][2.
95][2.
57][2.
25][2.
64][2.
93][2.
85]Govt.
stability0.
0520.
0420.
108-0.
065[0.
62][0.
53][1.
39][0.
57]Corruption0.
4450.
4380.
062-0.
518[1.
60][1.
49][0.
33][1.
37]Lawandorder-0.
25-0.
212-0.
2180.
065[0.
96][0.
79][1.
59][0.
30]Politicalstability0.
0070.
0040.
0190.
009[0.
27][0.
16][1.
08][0.
48]Economicstability0.
016-0.
0090.
006-0.
006[0.
38][0.
20][0.
17][0.
16]TaxonG&S0.
0210.
0160.
0220.
008-0.
032+-0.
032+-0.
044+-0.
047**[0.
69][0.
53][0.
74][0.
28][1.
63][1.
78][1.
79][2.
00]TaxonIPC0.
0280.
0530.
0250.
0410.
044**0.
050**0.
052+0.
049**[0.
51][1.
20][0.
47][0.
97][2.
02][2.
27][1.
96][2.
07]Observations322335313326376391367382Numberofcountries5052505251535153Note:Robustzstatisticsinbrackets.
significantat10%;**significantat5%;*significantat1%.
Allvariablesareindifference.
Second–orderautocorrelationsofresidualarealwaysrejected.
AidshareandDebtsharearetreatedasendogenousvariablesbecausetheycanbeinfluencedbyrevenueperformance.
Table7:DeterminantsofRevenuePerformance(DynamicPanelSpecification)DifferenceGMMSystemGMM22SubSampleAnalysisNext,welookcloserattherevenueperformanceofcountriesthatbelongtosimilarincomegroups.
Toproceed,wesplitthesampleaccordingtotheWorldBank'sclassificationofcountriesaccordingtoincomegroup(seeAppendixBforthelistofcountriesbyincomegroup).
TheestimationresultsaregiveninTables8-10.
Severalinterestingfindingsemerge.
WefindthattheshareofagricultureinGDPisasignificantdeterminantofrevenueperformanceacrossallincomeranges.
Ontheotherhand,whilepercapitaGDPhasastrongimpactonrevenuemobilizationinhigh-incomecountries,itseffectissomewhatweakerinlow-incomeandmiddle-incomecountries.
Forthelow-andmiddle-incomecountrieswealsofindastrongandpositiverelationshipimpactfromopennesstotrade;thisrelationshipisnotalwayssignificantforhigh-incomecountries.
Forlow-incomecountries,foreignaidhasasignificantpositiveeffectonrevenueperformanceacrossmostspecifications.
Forthesecountries,anincreaseinforeignaidby1percentcanimproverevenueperformancebyasmuchas0.
11percent.
Thisrelationshipisnotstatisticallysignificantformiddle-incomeandhigh-incomecountries.
Thereisnosignificantrelationshipbetweenforeigndebtandrevenueperformanceinanyofthegroups.
Amonginstitutionalfactors,thecoefficientoncorruptionissignificantforlow-incomeandmiddle-incomecountries.
Indeed,forthesecountries,areductionincorruption(implyinganincreaseinthecorruptionindex)wouldsubstantiallyincreaserevenue.
Forexample,inlow-incomecountries,anincreaseinthecorruptionindexofoneunitwouldimproverevenueperformancebyabout1.
5percent;andinmiddle-incomecountries,theeffectisslightlygreaterthan0.
5percent.
Ontheotherhand,thecoefficientsongovernmentstabilityandlawandorderarenotstatisticallysignificantinanyofthegroups.
Next,theresultssuggestthatpoliticalstabilityisweaklyrelatedtorevenueperformanceforlow-andmiddleincomecountriesbutnotforhigh-incomecountries.
Forlow-incomecountries,anincreaseinthepoliticalstabilityindexofoneunitcanincreaserevenueperformanceby0.
08percent;formiddle-incomecountriestheeffectwouldbe0.
07percent.
However,politicalstabilityhasaweaknegativerelationshipinhigh-incomecountries.
Also,economicstabilityhasaweakimpactonrevenueperformance,andonlyinlow-incomecountries.
Finally,wefindthatinlow-incomeandhigh-incomecountries,butnotinthemiddle-incomegroup,greaterrelianceontaxinggoodsandservicesasasourceofrevenueisassociatedwithpoorrevenueperformance.
Furthermore,greaterrelianceontaxingincome,profitsandcapitalgainsisassociatedwithimprovedrevenueperformanceacrossallincomegroups.
23(I)(II)(III)(IV)(V)(VI)(VII)(VIII)(IX)(X)(XI)(XII)Constant-15.
452**-7.
226-8.
258-0.
935-22.
196*-14.
714**33.
650*27.
907*30.
128*17.
531*19.
410*15.
528*[2.
00][0.
64][0.
92][0.
12][4.
02][2.
17][15.
51][10.
82][12.
64][6.
16][8.
98][4.
45]LogPCGDP4.
781*2.
946**2.
922**1.
5974.
102*2.
693**[5.
14][2.
05][2.
37][1.
34][5.
84][2.
45]Agri.
share-0.
398*-0.
358*-0.
432*-0.
204*-0.
328*-0.
211*[7.
11][6.
06][7.
59][6.
24][8.
80][5.
86]Importshare0.
102*0.
115*0.
172*0.
176*0.
111*0.
078*0.
057*0.
131*0.
123*0.
100*[5.
38][5.
02][5.
23][5.
72][3.
60][3.
75][2.
90][4.
93][5.
42][3.
69]Aidshare-0.
0010.
006-0.
0240.
115**0.
067**0.
038+0.
045+0.
114*[0.
02][0.
12][1.
07][2.
54][2.
07][1.
84][1.
73][2.
88]Debtshare0.
120**-0.
0160.
091-0.
081-0.
024-0.
0520.
016-0.
098**[2.
38][0.
33][1.
54][1.
53][0.
56][1.
28][0.
45][2.
20]Govt.
stability-0.
142-0.
164[1.
17][1.
49]Corruption1.
469*1.
004**[3.
23][2.
44]Lawandorder-0.
342-0.
093[1.
10][0.
34]Politicalstability0.
0160.
083*0.
0050.
043+[0.
48][2.
67][0.
18][1.
65]Economicstability0.
102**0.
0330.
081+0.
055[2.
01][0.
82][1.
63][1.
26]TaxonG&S-0.
107**-0.
106**-0.
125*-0.
135*[2.
35][2.
30][3.
29][3.
66]TaxonIPC0.
168*0.
226*0.
152*0.
177*[5.
03][4.
88][4.
93][4.
48]Taxontrade-0.
0310.
003-0.
019-0.
024[0.
71][0.
08][0.
53][0.
83]Observations889882835136516136888882841136512136Numberofcountries444442193219434341193119Note:Robustzstatisticsinbrackets.
significantat10%;**significantat5%;*significantat1%.
Table8:DeterminantsofRevenuePerformance(Low-IncomeCountries)24(I)(II)(III)(IV)(V)(VI)(VII)(VIII)(IX)(X)(XI)(XII)Constant0.
846-0.
8590.
114-18.
1775.
542-21.
316**22.
684*15.
538*14.
602*12.
157*11.
128*12.
527*[0.
06][0.
07][0.
01][1.
38][0.
45][2.
06][15.
62][10.
99][12.
12][4.
50][5.
54][3.
93]LogPCGDP2.
221.
6161.
455+3.
370**0.
4043.
789*[1.
38][1.
18][1.
60][2.
19][0.
27][2.
99]Agri.
share-0.
150**-0.
130*-0.
106**-0.
052-0.
078-0.
109+[2.
53][2.
70][2.
14][0.
96][1.
44][1.
92]Importshare0.
177*0.
166*0.
169*0.
149*0.
181*0.
170*0.
167*0.
172*0.
144*0.
169*[9.
20][10.
46][6.
24][7.
49][7.
56][9.
22][10.
85][6.
53][7.
35][7.
89]Aidshare0.
0850.
036-0.
0490.
0190.
0650.
015-0.
0360.
089[1.
14][0.
29][0.
63][0.
16][0.
92][0.
13][0.
54][0.
78]Debtshare-0.
0460.
0280.
0210.
029-0.
068-0.
033-0.
002-0.
043[0.
82][0.
29][0.
33][0.
37][1.
22][0.
33][0.
03][0.
50]Govt.
stability0.
0710.
036[0.
60][0.
32]Corruption0.
441+0.
554**[1.
84][2.
23]Lawandorder-0.
22-0.
145[0.
95][0.
57]Politicalstability0.
070*0.
0480.
070*0.
071**[2.
88][1.
41][3.
17][2.
05]Economicstability-0.
027-0.
061-0.
039-0.
081[0.
64][1.
24][0.
93][1.
60]TaxonG&S-0.
032-0.
023-0.
032-0.
022[0.
88][0.
71][0.
90][0.
68]TaxonIPC0.
109+0.
099+0.
089+0.
08+[1.
89][1.
92][1.
60][1.
63]Taxontrade-0.
03-0.
068-0.
104**-0.
107**[0.
52][1.
20][2.
03][2.
21]Observations507507465180316183507507465180316183Numberofcountries313130202421313130202421Note:Robustzstatisticsinbrackets.
+significantat10%;**significantat5%;*significantat1%.
Table9:DeterminantsofRevenuePerformance(Middle-IncomeCountries)25(I)(II)(III)(IV)(V)(VI)(VII)(VIII)(IX)(X)(XI)(XII)Constant-10.
348-12.
575-8.
202-27.
003-113.
269*-63.
548**30.
703*34.
220*27.
199*27.
322*35.
535*30.
044*[0.
76][0.
91][0.
66][0.
91][6.
18][2.
50][18.
38][10.
80][14.
15][6.
68][6.
27][4.
81]LogPCGDP3.
900**4.
045*3.
316**5.
460+15.
716*9.
923*[2.
52][2.
71][2.
37][1.
67][7.
25][3.
33]Agri.
share-0.
402*-0.
391*-0.
468*-0.
534+-0.
836*-0.
730*[3.
89][3.
28][4.
47][1.
68][5.
49][3.
28]Importshare0.
0090.
052**-0.
0090.
032-0.
029-0.
090.
055**-0.
045*-0.
039-0.
069*[0.
34][2.
46][0.
40][1.
43][1.
59][1.
46][2.
23][2.
62][1.
19][3.
98]Aidshare-0.
0280.
2470.
450.
7610.
0690.
4940.
570+0.
904[0.
36][0.
42][1.
37][1.
11][0.
64][0.
82][1.
79][1.
47]Debtshare0.
0130.
088-0.
0550.
0830.
0030.
144+0.
1280.
274*[0.
26][1.
22][0.
83][1.
30][0.
05][1.
77][1.
48][3.
42]Govt.
stability-0.
516*-0.
274[2.
70][1.
29]Corruption0.
9920.
756[1.
29][0.
93]Lawandorder0.
6251.
279[0.
81][1.
56]Politicalstability-0.
181*-0.
124-0.
137*0.
033[3.
27][1.
56][2.
61][0.
71]Economicstability0.
120.
0850.
041-0.
013[1.
41][0.
74][0.
48][0.
09]TaxonG&S-0.
203*-0.
093**-0.
276*-0.
210*[4.
11][2.
30][6.
22][4.
21]TaxonIPC0.
157+0.
215*0.
0390.
05[1.
86][4.
70][0.
43][1.
04]Taxontrade-0.
278-0.
206-0.
221-0.
186[1.
43][1.
34][1.
18][1.
34]Observations47945633771197834294213526218874Numberofcountries302922121613292823121613Note:Robustzstatisticsinbrackets.
+significantat10%;**significantat5%;*significantat1%.
Table10:DeterminantsofRevenuePerformance(High-IncomeCountries)26Usingvariousformsofpaneldataestimations,andcorrectingfortheobservedpersistenceinrevenueperformance,ourresultsconfirmthattheprincipaldeterminantsofrevenueperformanceincludefactorslikepercapitaGDP,agriculture'sshareinGDP,tradeopennessforeignaid,corruption,politicalstabilityandspecificsourcesoftaxrevenue.
Althoughtheresultsarebroadlysimilaracrossmostspecifications,weprefertheresultsfromthepanel-correctedstandarderrorestimateswithpanelspecificcorrelationcoefficientandsystem-GMMestimates.
V.
ASSESSMENTOFREVENUEPERFORMANCESofarouranalysishasfocusedonfindingthemainfactorsthataffectrevenueperformanceinasampleofdevelopingcountries.
However,aspointedoutbyChelliah(1971)andChelliahet.
al.
(1975),thisdoesnottelluswhetheracountrycouldnot,ifitwanted,attainhigherrevenueperformance.
Countriesinherentlyhavedifferentcapacitiestoraiserevenues,andthismustbetakenintoconsiderationwhilemakingcross-countryrevenuecomparisons.
Wefollowthesestudiesandcomputetherevenueeffortforthecountriesinoursample.
Ourstartingpointistotaketheestimatedcoefficientsoftheregressionsintheprevioussectiontocomputethe'predicted'revenueperformanceofthecountriesinthesample.
Next,weusethispredictedrevenueperformancetoconstructanindexofrevenueeffortbytakingtheratiooftheactualrevenueperformanceandthepredictedvalues.
Thus,acountrythatliesontheregressionlinewillhavearevenueperformanceindexequalto1,andcountriesthathaveactualrevenueperformanceabove(below)predictedrevenueperformancehavearevenueeffortindexbiggerthan(smallerthan)one.
Ofcoursethisapproachhasanumberoflimitations.
First,theremightbesomeunobservedvariablesthataffectrevenueperformance.
Second,whilecalculatingthetaxpotentialwemustfocusonlyonfactors,whichare'given'i.
e.
,beyondthecontrolofthegovernment.
Finally,therevenueeffortindexwillnotberobusttotheregressionspecification.
Therefore,indecidingwhichequationtouse,oneneedstoconsiderthestatisticalfitaswellastheeconomicrationale.
Awareofthesequalifications,weproceedandwepresenttherevenueeffortindicesinTable11.
7WhenweincludepercapitaGDPasoneoftheexplanatoryfactors,43countriesperformbetterthanpredicted(whenagricultureshareisincludedinstead,thenumberdrops7Tocalculatetheseindices,weusedthespecificationsincolumn(III)and(IX)ofTable5.
ThesespecificationsincludepercapitaGDP,tradeopenness,agricultureshare,aidanddebtshare,anddummiesforbeingresourcerichandlandlocked.
27marginallyto42).
8WecanseefromTable11thatanumberofSub-SaharanAfricancountrieshaveexhibitedremarkablerevenueperformancecomparedtoothercountries,mostnotablythoseinLatinAmerica.
Sub-SaharanAfricancountriesthathavearevenueeffortindexgreaterthan1.
5includeBurundi,Botswana,Malawi,andZimbabwe.
ThesecountrieshaveprobablylargelyusedtheirtaxpotentialastheyareconstrainedbylowpercapitaGDP,adominantagriculturesectorandlimiteddegreeofopennesstotrade.
Ontheotherhand,countrieslikeArgentina,Brazil,Peru,Panama,UnitedArabEmiratesetc.
haverevenueperformanceindiceswellbelow0.
75,whichsuggeststhattheyhaveyettoachievetheirfullrevenuepotential.
Usingourfindingthatcountriesatdifferentstagesofdevelopmentexhibitsignificantlydifferentrelationshipsbetweeneconomicvariablesandrevenueperformance,wecreaterevenueperformanceindicesseparatelyforlow-income,middle-incomeandhigh-incomedevelopingcountries.
Weagainusethespecificationsoutlinedincolumn(III)and(IX)ofTables8-10;theresultsofthisexerciseareinTable12.
Wenoticethatamonglow-incomecountries,theperformanceofSub-SaharanAfricancountriesisquitevaried.
Forexample,countrieslikeZimbabwe,Zambia,BurundiandEthiopiaperformeddistinctlybetterthanpredicted.
Ontheotherhand,countrieslikeChadandMadagascarfellshortoftheirrevenuepotential.
Also,somecountriesshowdifferenttaxperformancedependingonthespecification.
Forexample,ifweconsiderthespecificationthatincludesGDPpercapita,thencountrieslikeNiger,Guinea-BissauandTogoperformrelativelypoorly;however,ifwetakeintoaccountthepresenceofalargeagriculturesector(morethan40percent),thenthesesamecountriesperformbetterthanpredicted.
Amongthemiddle-incomegroup,countriessuchasEgypt,Tunisia,MoroccoandAlgeriaperformwellgiventheireconomicstructure.
Thebelow-averageperformersaremainlysomeLatinAmericancountrieslikeColombia,ElSalvadorandGuatemala,aswellassomecountriesfromtheformerSovietUnion,likeGeorgiaandKazakhstan.
Finally,amonghigh-incomecountries,resource-richcountrieslikeKuwait,BotswanaandOmanhaveperformedclosetotheirrevenuepotential.
CountriesthathavefailedtorealizetheirrevenuepotentialincludecountriesfromLatinAmericaandEasternEuropelikeArgentina,CostaRica,Latvia,LithuaniaandtheSlovakRepublic.
8Indeed,therevenueperformanceindexyieldslargelysimilarresultsirrespectiveoftheuseofpercapitaGDPoragricultureshareasanexplanatoryvariableinitsconstruction.
AsimplecorrelationbetweenthevaluesoftheindicesbasedonthetwospecificationsyieldsaR2equalto0.
76.
Moreover,formostcountries,thedifferencebetweenthetwoindicesislessthan0.
3,andlessthan0.
1inmany.
28CountryIndexNo.
RankIndexNo.
RankCountryIndexNo.
RankIndexNo.
RankAlbania0.
86631.
0634Kazakhstan0.
48980.
4898Algeria1.
44131.
2813Kenya1.
28181.
0238Angola1.
6131.
312Korea,Rep.
0.
73820.
6484Argentina0.
311020.
28101Kuwait1.
44121.
3111Bahrain0.
92540.
8561KyrgyzRepublic0.
93511.
3110Bangladesh0.
87610.
6981Latvia0.
63890.
5793Belarus0.
82710.
8659Lesotho1.
25211.
2814Belize1420.
9944Lithuania0.
63900.
6187Benin1.
05410.
9151Macao,China0.
6587Bolivia0.
8750.
7180Madagascar0.
92530.
7279Botswana1.
6911.
63Malawi1.
591.
555Brazil0.
71830.
5991Mali0.
7678142Bulgaria1.
07371.
0536Malta1.
19271.
1523BurkinaFaso0.
84680.
7872Mauritius0.
86640.
8165Burundi1.
5183.
241Moldova0.
93521.
0635Cameroon0.
84660.
9152Mongolia0.
88591.
1129CapeVerde1.
4141.
1920Morocco1.
34151.
1326CentralAfricanRepublic0.
5893141Mozambique0.
97460.
7773Chad0.
411000.
4799Namibia1.
26201.
219China0.
41010.
32100Nicaragua0.
79760.
7777Colombia0.
57950.
5296Niger0.
77770.
8953Comoros0.
8957140Nigeria1430.
8757Congo,Dem.
Rep.
0.
45990.
6286Oman1.
34161.
1921Congo,Rep.
1.
49100.
9250Panama0.
68850.
688CostaRica0.
6920.
689PapuaNewGuinea1.
22231.
2516Coted'Ivoire1.
2251.
1327Paraguay0.
61910.
7776Croatia1.
07381.
0237Peru0.
75790.
690Cyprus0.
71840.
6882Philippines0.
8740.
7775CzechRepublic1.
05401.
0139Poland1.
14310.
9748DominicanRepublic0.
66860.
5992Rwanda0.
84671.
130Egypt,ArabRep.
1.
5741.
339Principe0.
8855ElSalvador0.
58940.
5395Senegal1.
11320.
8264EquatorialGuinea0.
96491.
48Seychelles1.
584Ethiopia1.
6923.
152SierraLeone0.
81730.
7970Fiji1.
1331.
0932SlovakRepublic0.
84690.
8660Gabon1.
22241.
0931Slovenia0.
84700.
8166Gambia,The0.
98440.
9747SolomonIslands1.
0935Georgia0.
52960.
5794SouthAfrica0.
94500.
8463Ghana0.
73810.
9746SriLanka1.
05390.
9945Grenada1.
08360.
9943St.
KittsandNevis0.
91560.
8462Guatemala0.
52970.
5197St.
Lucia0.
97470.
8758Guinea0.
87600.
7774St.
Vin&theGren1.
16281.
0933Guinea-Bissau1.
14291.
516Swaziland1.
1341.
1822Haiti0.
64880.
6385Tanzania0.
86620.
8954Honduras0.
75800.
6583Togo1.
14301.
218Hungary1.
33171.
2715TrinidadandTobago1.
47111.
2217Indonesia0.
91550.
868Tunisia1.
27191.
1425Iran,IslamicRep.
0.
88580.
8756Ukraine0.
82720.
7871Israel1.
546UnitedArabEmirates0.
071030.
07102Jamaica1.
23220.
9749Uruguay0.
85650.
7678Jordan0.
98450.
869Venezuela,RB0.
96480.
867Author'sCalculations.
AgricultureShareTable11:RevenueEffortIndicesforDevelopingCountries(1980–2004)PerCapitaGDPPerCapitaGDPAgricultureShare29IndexNo.
RankIndexNo.
RankIndexNo.
RankIndexNo.
RankIndexNo.
RankIndexNo.
RankAngola1.
1471.
2113Albania0.
94161.
0113Argentina0.
2280.
2627Bahrain0.
7833Algeria1.
5921.
542Bahamas,TheBangladesh0.
48370.
5841Belarus0.
93170.
9315Belize0.
74141.
0710Benin0.
58310.
8329Bolivia0.
99130.
9216Botswana0.
9371.
088BurkinaFaso0.
72210.
8131Brazil0.
9190.
8520CostaRica0.
42270.
6123Burundi1.
2646.
121Bulgaria1.
281.
187Croatia0.
78111.
0211Cameroon0.
61290.
8328CapeVerde1.
4931.
413Cyprus0.
54200.
6820CentralAfricanRepublic0.
62281.
378China0.
4310.
3731CzechRepublic0.
8110112Chad0.
44390.
5543Colombia0.
67260.
6626Gabon0.
9651.
165Comoros0.
59300.
9923DominicanRepublic0.
71250.
6825Grenada0.
8191.
089Congo,Dem.
Rep.
0.
46380.
7138Egypt,ArabRep.
1.
6511.
551Hungary141.
382Congo,Rep.
0.
8680.
8330ElSalvador0.
63270.
6127Israel1.
17229Coted'Ivoire0.
8491.
0420Fiji1.
14101.
1210Korea,Rep.
0.
51230.
624EquatorialGuinea0.
78141.
85Georgia0.
49300.
4930Kuwait1.
1911.
353Ethiopia1.
3524.
712Guatemala0.
57280.
5728Latvia0.
46250.
5825Gambia,The0.
66240.
9824Honduras0.
76240.
7124Lithuania0.
46240.
6221Ghana0.
53350.
9725Indonesia0.
92180.
8818Macao,China0.
512230Guinea0.
64270.
7139Iran,IslamicRep.
0.
9914114Mauritius0.
64180.
8316Guinea-Bissau0.
73191.
993Jamaica1.
2471.
139Oman0.
9561.
137Haiti0.
41410.
5542Jordan0.
97150.
917Panama0.
53210.
6222Kenya0.
71220.
927Kazakhstan0.
55290.
5429Poland0.
76120.
9213KyrgyzRepublic0.
82101.
526Morocco1.
4141.
334Seychelles1.
61Lesotho1.
3231.
467Namibia1.
2861.
256SlovakRepublic0.
46260.
5626Madagascar0.
5360.
6440Paraguay0.
76230.
8122Slovenia0.
65170.
7918Malawi1.
2361.
94Peru0.
88210.
8123St.
KittsandNevis0.
72150.
8715Mali0.
8131.
3310Philippines0.
85220.
8321St.
Lucia0.
74130.
9114PerCapitaGDPAgricultureShareTable12:RevenuePerformanceIndex(Income-BasedClassification)Low–IncomeCountriesMiddle–IncomeCountriesHigh–IncomeCountriesPerCapitaGDPAgricultureSharePerCapitaGDPAgricultureShare30IndexNo.
RankIndexNo.
RankIndexNo.
RankIndexNo.
RankIndexNo.
RankIndexNo.
RankMalta1.
0719RussianFederation32St.
Vin.
andtheGren.
0.
981.
174Moldova0.
82111.
2112Samoa33TrinidadandTobago1.
0331.
166Mongolia0.
82121.
0818SouthAfrica1.
1111.
0811UnitedArabEmirates0.
06290.
0728Mozambique0.
55330.
7734SriLanka1.
05121.
0212Uruguay0.
55190.
7119Nicaragua0.
54340.
7137Swaziland1.
1591.
148Venezuela,RB0.
71160.
8217Niger0.
64261.
0121Tunisia1.
3551.
35Nigeria0.
64250.
7932Turkey34PapuaNewGuinea0.
78151.
1715Ukraine0.
88200.
8719Rwanda0.
76171.
311Vanuatu35SoToméandPríncipe1.
0122Senegal0.
67230.
7436SierraLeone0.
43400.
7535SolomonIslands0.
7716Tanzania0.
56320.
9326Togo0.
72201.
1416Vietnam0.
75181.
0817Zambia1.
2651.
1714Zimbabwe1.
3811.
369Table12:RevenuePerformanceIndex(IncomeBasedClassification)(concluded)Low–IncomeCountriesMiddle–IncomeCountriesHigh–IncomeCountriesPerCapitaGDPAgricultureSharePerCapitaGDPAgricultureSharePerCapitaGDPAgricultureShare31VI.
POLICYRECOMMENDATIONSANDCONCLUSIONSOurprimaryobjectivewastoinvestigaterevenueperformanceofalargesetofdevelopingcountriesoverthepast25years.
WefoundthatseveralstructuralfactorslikepercapitaGDP,shareofagricultureinGDPandtradeopennessarestatisticallysignificantandstrongdeterminantsofrevenueperformance.
Wealsolookedattheimpactofforeignaidandforeigndebtonrevenuemobilization.
Ourresultsindicatethatalthoughforeignaidimprovesrevenueperformancesignificantly,debtdoesnot.
Amongtheinstitutionalfactors,wefoundcorruptionhasasignificantlynegativeeffectonrevenueperformance.
Politicalandeconomicstabilityalsoaffectrevenueperformance,butonlyacrosscertainspecifications.
Finally,wefoundthatcountriesthatdependontaxinggoodsandservicesastheirprimarysourceoftaxrevenue,tendtohavepoorerrevenueperformance.
Ontheotherhand,countriesthatputgreateremphasisontaxingincome,profitsandcapitalgains,performbetter.
Theseresultsarerobusttoavariedsetofspecifications.
Wecontinuedtheanalysisbydividingthesampleofcountriesbasedonincomegroups.
Doingso,wefoundthatthestructuralfactorscontinuetobesignificantacrossallincomegroups,butforeignaidhasasignificantandpositiveeffectonlyforthegroupoflow-incomecountries.
Corruptionremainsimportantforlow-incomeandmiddle-incomecountries,butnotforhigh-incomecountries.
Also,apoliticallystableregimehelpsgeneratehigherrevenueforlow-incomecountries.
Andwhiletheshareoftaxesonincome,profitandcapitalgainsinrevenueispositivelyassociatedwithrevenueperformanceacrossallgroups,thatoftaxesongoodsandservicesisnegativelyassociatedwithrevenueperformanceinlow-incomeandhigh-incomecountries.
Finally,wecalculatedtherevenueperformanceindicesbycomparingactualrevenueperformancewiththepredictedrevenueperformance.
WefoundthatseveralAfricancountries,includingfromSub-SaharanAfricalikeBurundi,Ethiopia,Guinea-BissauandZimbabweperformsignificantlybetterthanpredicted.
Ontheotherhand,manycountriesfromLatinAmericaandEasternEuropefallwellshortoftheirrevenuepotential.
Ourresultssuggestseveralpolicyrecommendations.
Thepositiveimpactofforeignaidonrevenueperformance,especiallyforlow-incomecountries,recommendsincreasedaidtothesecountries.
Inthiscontext,therichdonorcountries'pledge,"tomakeconcreteeffortstowardsthetargetof0.
7percentoftheirGNPininternationalaid",couldbeastepintherightdirection9.
AspointedoutbyGuptaetal.
(2004),donorcountriesshouldmonitortheaidflowandensurethatitisusedforpovertyreductionandinfrastructuredevelopment,whichwouldgeneratehigherrevenueinthefuture.
Areductionincorruptionandanincreaseintheoverallpoliticalstabilityofaregimeareexpectedtoimproverevenueperformanceoflow-incomeandmiddle-incomecountries.
Developingcountriesmustactivelystrivetoreducetheopportunitiesforcorruptionintaxadministrationandchangetheincentivestructurefortaxofficials.
9Inreality,theactualflowofaidhasbeenmuchlessthanpromised.
In2003,totalaidfromthe22richestcountriestotheworld'sdevelopingcountrieswasjustUS$69billion—ashortfallofUS$130billionfromthe0.
7percentpromise.
Onaverage,theworld'srichestcountriesprovidedjust0.
25percentoftheirGNPinofficialdevelopmentassistance.
32Thelow-incomecountrieswouldalsobenefitfromastablepoliticalregime.
Incountriescharacterizedbypoliticalinstability,thegovernmentsfaceacredibilityproblemandthegovernmentisunabletodefineandarbitratepropertyrights.
Suchasituationpreventsinvestorsfromundertakinglong-terminvestments,whichinturnlowerseconomicgrowthandoveralltaxrevenue.
Giventhepositiverelationbetweentaxesandrevenueperformancealongwiththenegativerelationbetweenindirecttaxesandrevenueperformance,onewouldbetemptedtoconcludethatagreaterrelianceontheformerwouldimprovetaxperformance.
However,thegroundrealitiesinmanydevelopingcountriesmaynotmakesuchamovepossible.
Inmostdevelopingcountriestherearesevereproblemsinraisingtaxrevenuethroughdirecttaxes.
Itisdifficulttodevelopamasssystemofpersonalincometaxesasasignificantproportionofthepopulationisextremelypoor.
Althoughinsomeofthemiddle-andthehigh-incomedevelopingcountriesthereisoftenscopeforrationalizingtheratestructureandlimitingexemptionstoimproverevenuefrompersonalincometax,whichattimesamounttoseveraltimesthecountry'spercapitaGDPandthereforebenefitthosewithhighincomes.
Thetraditionalargumentagainstmostindirecttaxeshasbeenitsregressivity,whichexacerbatesinequalityandreducesthetaxbase,whichmayleadtoareductionintheshareofrevenueinGDP.
However,inrecentyears,withtheadoptionofVATinmanydevelopingcountries,therevenueperformanceresponseofthesehavebeenmixed.
VAThasagreaterpotentialinimprovingtherevenueperformanceindevelopingcountries,comparedtotraditionalcommoditytaxes,foranumberofreasons.
TheselfenforcingmechanismofVATcaninducegreatercompliance.
Byincludingservicesinitsfold,VATbroadensthetaxbaseanditeliminatesthecascadingeffectsinvolvedinturnovertaxesandsomesalestaxsystems.
33ReferencesAlm,James,JorgeMartinez-VazquezandFriedrichSchneider,2004,"'Sizing'theProblemoftheHard-to-Tax,"inTaxingtheHardtoTax,ed.
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87pp115–43.
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,1971,"TrendsinTaxationinDevelopingCountries,"StaffPapers,InternationalMonetaryFund,Vol.
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,HesselJ.
Baas,andMargaretR.
Kelly,1975,"TaxRatiosandTaxEffortinDevelopingCountries,1969–71,"Staffpapers,InternationalMonetaryFund,Vol.
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187–205.
Eltony,M.
Nagy,2002,"DeterminantsofTaxEffortsinArabCountries,"ArabPlanningInstituteWorkingPaper207.
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Tiongson,2004,"ForeignAidandRevenueResponse:DoestheCompositionofAidMatter"inHelpingCountriesDevelop:TheRoleofFiscalPolicy,ed.
byGupta,Clements,andGabrielaInchauste(Washington:InternationalMonetaryFund).
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bySanjeevGupta,BenedictClements,andGabrielaInchauste(Washington:InternationalMonetaryFund).
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,1991,"TaxSharesinDevelopingCountries:APanelStudy,"JournalofDevelopmentEconomics,Vol.
35,pp.
173–185.
Piancastelli,Marcelo,2001,"MeasuringtheTaxEffortofDevelopedandDevelopingCountries:CrossCountryPanelDataAnalysis,1985/95,"IPEAWorkingPaperNo.
818.
34Rodrik,Dani,1998,"WhydoMoreOpenEconomieshaveBiggerGovernments"JournalofPoliticalEconomy,Vol.
106,pp.
997-1032Stotsky,JanetG.
andAsegedechWoldeMariam.
,1997,"TaxEffortinSubSaharanAfrica,"IMFWorkingPaper97/107(Washington:InternationalMonetaryFund).
Tait,AlanA.
,BarryJ.
Eichengreen,andWilfridL.
M.
Grtz,1979,"InternationalComparisonsofTaxationforSelectedDevelopingCountries,1972–76,"StaffPapers,InternationalMonetaryFund,Vol.
26,pp.
123–156.
Tanzi,Vito,1992,"StructuralFactorsandTaxRevenueinDevelopingCountries:ADecadeofevidence,"inOpenEconomies:StructuralAdjustmentandAgriculture,ed.
byIanGoldinandL.
AlanWinters(Cambridge:CambridgeUniversityPress),pp.
267–281WorldBank,2004,"GlobalMonitoringReport2004,PoliciesandActionsforachievingtheMDGsandRelatedOutcomes"(Washington:WorldBank)35APPENDICESAppendixA.
ListofCountriesAlbaniaGeorgiaPanamaAlgeriaGhanaPapuaNewGuineaAngolaGrenadaParaguayArgentinaGuatemalaPeruBahamas,TheGuineaPhilippinesBahrainGuinea-BissauPolandBangladeshHaitiRussianFederationBelarusHondurasRwandaBelizeHungarySamoaBeninIndonesiaSaoTomeandPrincipeBoliviaIran,IslamicRep.
SenegalBotswanaIsraelSeychellesBrazilJamaicaSierraLeoneBulgariaJordanSingaporeBurkinaFasoKazakhstanSlovakRepublicBurundiKenyaSloveniaCameroonKorea,Rep.
SolomonIslandsCapeVerdeKuwaitSomaliaCentralAfricanRepublicKyrgyzRepublicSouthAfricaChadLatviaSriLankaChinaLesothoSt.
KittsandNevisColombiaLiberiaSt.
LuciaComorosLithuaniaSt.
VincentandtheGrenadinesCongo,Dem.
Rep.
Macao,ChinaSudanCongo,Rep.
MadagascarSwazilandCostaRicaMalawiTajikistanCoted'IvoireMaliTanzaniaCroatiaMaltaTogoCyprusMauritaniaTrinidadandTobagoCzechRepublicMauritiusTunisiaDominicaMexicoTurkeyDominicanRepublicMoldovaUgandaEcuadorMongoliaUkraineEgypt,ArabRep.
MoroccoUnitedArabEmiratesElSalvadorMozambiqueUruguayEquatorialGuineaNamibiaVanuatuEthiopiaNicaraguaVenezuela,RBFijiNigerVietnamGabonNigeriaZambiaGambia,TheOmanZimbabwe36AppendixB.
ClassificationofCountriesAccordingtoIncomeLowIncomeCountriesMiddleIncomeCountriesHighIncomeCountriesAngolaAlbaniaArgentinaBahrainAlgeriaBahamas,TheBangladeshBelarusBelizeBeninBoliviaBotswanaBurkinaFasoBrazilCostaRicaBurundiBulgariaCroatiaCameroonCapeVerdeCyprusCentralAfricanRepublicChinaCzechRepublicChadColombiaDominicaComorosDominicanRepublicGabonCongo,Dem.
Rep.
EcuadorGrenadaCongo,Rep.
Egypt,ArabRep.
HungaryCoted'IvoireElSalvadorIsraelEquatorialGuineaFijiKorea,Rep.
EthiopiaGeorgiaKuwaitGambia,TheGuatemalaLatviaGhanaHondurasLithuaniaGuineaIndonesiaMacao,ChinaGuinea-BissauIran,IslamicRep.
MauritiusHaitiJamaicaMexicoKenyaJordanOmanKyrgyzRepublicKazakhstanPanamaLesothoMoroccoPolandLiberiaNamibiaSeychellesMadagascarParaguaySingaporeMalawiPeruSlovakRepublicMaliPhilippinesSloveniaMaltaRussianFederationSt.
KittsandNevisMauritaniaSamoaSt.
LuciaMoldovaSouthAfricaSt.
VincentandtheGrenadinesMongoliaSriLankaTrinidadandTobagoMozambiqueSwazilandUnitedArabEmiratesNicaraguaTunisiaUruguayNigerTurkeyVenezuela,RBNigeriaUkrainePapuaNewGuineaVanuatuRwandaSaoTomeandPrincipeSenegalSierraLeoneSolomonIslandsSomaliaSudanTajikistanTanzaniaTogoUgandaVietnamZambiaZimbabwe37AppendixC.
IllustrativeListofCountriesUsedintheRegressionsTheestimationspecificationsuseawidelydifferentsetofcountriesdependingonthesetofexplanatoryvariablesaswellasmissingobservations.
AsanillustrationweprovidebelowalistofcountriesincludedinequationsrepresentedinColumn(1)to(VI)ofTable5.
Itcanbeclearlyseenthattheobservationsineachequationsarerandomlydistributedamongcountries,i.
e.
alltheequationshaveamixofhigh-,middle-andlow-incomecountries.
ColumnI(105countries)Albania,Algeria,Angola,Argentina,Bahrain,Bangladesh,Belarus,Belize,Benin,Bolivia,Botswana,Brazil,Bulgaria,BurkinaFaso,Burundi,Cameroon,CapeVerde,CentralAfricanRepublic,Chad,China,Colombia,Comoros,Congo,Dem.
Rep.
,Congo,Rep.
,CostaRica,Coted'Ivoire,Croatia,Cyprus,CzechRepublic,DominicanRepublic,Egypt,ArabRep.
,ElSalvador,EquatorialGuinea,Ethiopia,Fiji,Gabon,Gambia,The,Georgia,Ghana,Grenada,Guatemala,Guinea,Guinea-Bissau,Haiti,Honduras,Hungary,Indonesia,Iran,IslamicRep.
,Israel,Jamaica,Jordan,Kazakhstan,Kenya,Korea,Rep.
,Kuwait,KyrgyzRepublic,Latvia,Lesotho,Lithuania,Macao,China,Madagascar,Malawi,Mali,Malta,Mauritius,Moldova,Mongolia,Morocco,Mozambique,Namibia,Nicaragua,Niger,Nigeria,Oman,Panama,PapuaNewGuinea,Paraguay,Peru,Philippines,Poland,Rwanda,Senegal,SierraLeone,Singapore,SlovakRepublic,Slovenia,SolomonIslands,SouthAfrica,SriLanka,St.
KittsandNevis,St.
Lucia,St.
VincentandtheGrenadines,Swaziland,Tanzania,Togo,TrinidadandTobago,Tunisia,Uganda,Ukraine,UnitedArabEmirates,Uruguay,Venezuela,RB,Vietnam,Zambia,ZimbabweColumnII(104countries)Albania,Algeria,Angola,Argentina,Bahrain,Bangladesh,Belarus,Belize,Benin,Bolivia,Botswana,Brazil,Bulgaria,BurkinaFaso,Burundi,Cameroon,CapeVerde,CentralAfricanRepublic,Chad,China,Colombia,Comoros,Congo,Dem.
Rep.
,Congo,Rep.
,CostaRica,Coted'Ivoire,Croatia,Cyprus,CzechRepublic,DominicanRepublic,Egypt,ArabRep.
,ElSalvador,EquatorialGuinea,Ethiopia,Fiji,Gabon,Gambia,The,Georgia,Ghana,Grenada,Guatemala,Guinea,Guinea-Bissau,Haiti,Honduras,Hungary,Indonesia,Iran,IslamicRep.
,Israel,Jamaica,Jordan,Kazakhstan,Kenya,Korea,Rep.
,Kuwait,KyrgyzRepublic,Latvia,Lesotho,Lithuania,Macao,China,Madagascar,Malawi,Mali,Malta,Mauritius,Moldova,Mongolia,Morocco,Mozambique,Namibia,Nicaragua,Niger,Nigeria,Oman,Panama,PapuaNewGuinea,Paraguay,Peru,Philippines,Poland,Rwanda,Senegal,SierraLeone,SlovakRepublic,Slovenia,SolomonIslands,SouthAfrica,SriLanka,St.
KittsandNevis,St.
Lucia,St.
VincentandtheGrenadines,Swaziland,Tanzania,Togo,TrinidadandTobago,Tunisia,Uganda,Ukraine,UnitedArabEmirates,Uruguay,Venezuela,RB,Vietnam,Zambia,ZimbabweColumnIII(94countries)Albania,Algeria,Angola,Argentina,Bangladesh,Belarus,Belize,BeninBolivia,Botswana,Brazil,Bulgaria,BurkinaFaso,Burundi,Cameroon,CapeVerde,CentralAfricanRepublic,Chad,China,Colombia,Comoros,Congo,Dem.
Rep.
,Congo,Rep.
,CostaRica,Coted'Ivoire,Croatia,CzechRepublic,DominicanRepublic,Egypt,ArabRep.
,ElSalvador,EquatorialGuinea,Ethiopia,Fiji,Gabon,Gambia,The,Georgia,Ghana,Grenada,Guatemala,Guinea,Guinea-Bissau,Haiti,Honduras,Hungary,Indonesia,Iran,IslamicRep.
,Jamaica,Jordan,Kazakhstan,Kenya,KyrgyzRepublic,Latvia,Lesotho,Lithuania,Madagascar,Malawi,Mali,Mauritius,Moldova,Mongolia,Morocco,Mozambique,Nicaragua,Niger,Nigeria,Oman,Panama,PapuaNewGuinea,Paraguay,Peru,Philippines,Poland,Rwanda,Senegal,SierraLeone,SlovakRepublic,SolomonIslands,SouthAfrica,SriLanka,St.
KittsandNevis,St.
Lucia,,St.
VincentandtheGrenadines,Swaziland,Tanzania,Togo,TrinidadandTobago,Tunisia,Uganda,Ukraine,Uruguay,Venezuela,RB,Vietnam,Zambia,Zimbabwe38ColumnIV(51countries)Albania,Algeria,Belarus,Botswana,Brazil,Bulgaria,Cameroon,China,Congo,Dem.
Rep.
,Congo,Rep.
,CostaRica,Coted'Ivoire,Croatia,CzechRepublic,DominicanRepublic,Egypt,ArabRep.
,Ethiopia,Gambia,The,Ghana,Guatemala,Guinea,Hungary,Indonesia,Jamaica,Jordan,Kazakhstan,Kenya,Latvia,Lithuania,Madagascar,Moldova,Morocco,Nicaragua,Oman,Panama,PapuaNewGuinea,Paraguay,Peru,Philippines,Poland,Senegal,SierraLeone,SouthAfrica,SriLanka,TrinidadandTobago,Tunisia,Uruguay,Venezuela,RB,Vietnam,Zambia,ZimbabweColumnV(72countries)Albania,Algeria,Angola,Argentina,Bangladesh,Belarus,Bolivia,Botswana,Brazil,Bulgaria,BurkinaFaso,Cameroon,China,Colombia,Congo,Dem.
Rep.
,Congo,Rep.
,CostaRica,Coted'Ivoire,Croatia,CzechRepublic,DominicanRepublic,Egypt,ArabRep.
,ElSalvador,Ethiopia,Gabon,Gambia,The,Ghana,Guatemala,Guinea,Guinea-Bissau,Haiti,Hungary,Indonesia,Jamaica,Jordan,Kazakhstan,Kenya,Latvia,Lithuania,Madagascar,Malawi,Mali,Moldova,Mongolia,Morocco,Mozambique,Nicaragua,Niger,Nigeria,Oman,Panama,PapuaNewGuinea,Paraguay,Peru,Philippines,Poland,Senegal,SierraLeone,SlovakRepublic,SouthAfrica,SriLanka,Tanzania,Togo,TrinidadandTobago,Tunisia,Uganda,Ukraine,Uruguay,Venezuela,RB,,Vietnam,Zambia,ZimbabweColumnVI(53countries)Albania,Algeria,Belarus,Botswana,Brazil,Bulgaria,Cameroon,China,Congo,Dem.
Rep.
,Congo,Rep.
,CostaRica,Coted'Ivoire,Croatia,CzechRepublic,DominicanRepublic,Egypt,ArabRep.
,Ethiopia,Gambia,The,Ghana,Guatemala,Guinea,Hungary,Indonesia,Jamaica,Jordan,Kazakhstan,Kenya,Latvia,Lithuania,Mexico,Moldova,Mongolia,Morocco,Nicaragua,Oman,Panama,PapuaNewGuinea,Paraguay,Peru,Philippines,Poland,Senegal,SierraLeone,SouthAfrica,SriLanka,TrinidadandTobago,Tunisia,Uganda,Uruguay,Venezuela,RB,Vietnam,Zambia,Zimbabwe39AppendixD.
SummaryofFindingsofEmpiricalStudiesAuthorSignificantExplanatoryVariables(Sign)OtherVariablesIncludedintheRegressionsGoodnessofFitCountriesCoveredTimePeriodLotzandMorss(1967)aPercapitaGNP(+),tradeshare(+)10to60%72developingcountries1962-66Chelliah(1971)bMiningshare(+),nonmineralexportshare(+),agricultureshare(-)Percapitanonexportincome,exportratio25to50%50developingcountries1953-55and1966-68Chelliah,BaasandKelly(1975)bMiningshare(+),agricultureshare(-)Tradeshare,nonmineralexports,percapitanonexportincome11to45%47developingcountries1969-71Miningshare(+),nonmineralexportshare(+),exportshare(+)Percapitaincome,percapitanonexportincome,agricultureshare26to54%47developingcountriesTait,GrtzandEichengreen(1979)bMiningshare(+),nonmineralexportshare(+),exportshare(+)Percapitaincome,percapitanonexportincome,agricultureshare34to59%63developingcountries1972-76Tanzi(1981)cMiningshare(+),nonmineralexportshare(+)Percapitanonexportincome15to52%34SubSaharanAfricancountries1977Tanzi(1992)cAgricultureshare(-),importshare(+),foreigndebtshare(+)Percapitaincome,54%88developingcountries1978-88Leuthold(1991)Tradeshare(+),agricultureshare(-)Foreigngrants,miningshare38%8Africancountries1973-81StotskyandWoldeMariam(1997)cAgricultureshare(-),miningshare(-),exportshare(+),percapitaGDP(+),IMFdummy(+)Manufacturingshare,importshare57to94%46SubSaharanAfricancountries1990-95Ghura(1998)cPercapitaincome(+),agricultureshare(-),tradeopenness(+),existenceofoilandnonoilminingsector(+),structuralreforms(+),humancapitaldevelopment(+),inflation(-),corruption(-)Percentagechangeintermsoftrade,percentagechangeinrealexchangerate,changeinexternaldebttoGDPratioNotReported39SubSaharanAfricancountries1985-96Piancastelli(2001)cTradeshare(+),agricultureshare(-),manufacturingshare(+),servicesshare(+)PercapitaGDP38to84%75countries1985-95PercapitaGDP(+),miningshare(-)Importshare,exportshare,manufacturingshare,agricultureshare,outstandingforeigndebt50%6oilproducingArabcountriesEltony(2002)cPercapitaGDP(+),import(+),export(+),miningshare(+),agricultureshare(-),outstandingforeigndebt(+)Exportshare,manufacturingshare,78%10nonoilproducingArabcountries1994-2000Bird,Martinez-Vasquez&Torgler(2004)dPopulationgrowth(-),agricultureshare(-),inequality(-),shadoweconomy(-),institutions(+),entryregulations(-)PercapitaGDP,48to85%110developingandtransitionalcountries1990-99a.
DependentvariableisratiooftaxrevenuetoGNP.
b.
Dependentvariableisratiooftaxrevenue(excludingsocialsecuritypayments)toGNP.
c.
DependentvariableisratiooftaxrevenuetoGDP.
d.
DependentvariableisratiooftaxrevenuetoGDPandratioofcurrentrevenue(minusgrants)toGDP.