Abstract
Influential research has argued that foreign aid displaces domestic tax revenue when it is given in the form of grants. These claims are based on data that are deeply problematic: several different sources are amalgamated into one dataset, with no apparent checks on compatibility. In this article, a variety of econometric strategies are used to overcome these issues of data quality. The weight of evidence points to a modest but positive effect from all foreign aid on domestic tax revenue. Fears over a negative effect for aid grants appear unwarranted, and are accounted for by the inappropriate use of data or endogeneity concerns.
Original language | English |
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Pages (from-to) | 365-383 |
Number of pages | 19 |
Journal | Development Policy Review |
Volume | 34 |
Issue number | 3 |
Early online date | 5 Apr 2016 |
DOIs | |
Publication status | Published - May 2016 |
Keywords
- Foreign Aid
- Tax Revenue
- Data Quality
- MIMIC model
Profiles
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Paul Clist
- School of Global Development - Associate Professor in Development Economics
- Centre for Behavioural and Experimental Social Science - Member
- Behavioural and Experimental Development Economics - Member
- Impact Evaluation - Member
Person: Research Group Member, Academic, Teaching & Research