Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273901 
Year of Publication: 
2022
Series/Report no.: 
WIDER Working Paper No. 2022/99
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
There exists a burgeoning empirical literature on the impact of aid fragmentation on development outcomes in aid-receiving countries, with it being widely recognized that aid fragmentation is deleterious. This paper adds to the existing literature by estimating the impact of aid fragmentation on tax revenue mobilization in developing countries. Drawing on the popular system generalized method of moments technique to counter endogeneity issues, this study focuses on a sample of 90 developing countries covering the period from 2000 to 2020. We show that aid fragmentation, measured by the Herfindahl index, has a significant negative impact on recipient countries' tax revenue ratios, an impact that is not mitigated by the level of institutional quality. The paper also explores the impact of aid fragmentation on tax structure and finds convincing evidence that direct taxes, particularly corporate income taxes, are the most affected. Value-added tax is the only indirect tax affected by aid fragmentation.
Subjects: 
aid fragmentation
Herfindahl index
tax revenue
institutional quality
JEL: 
F35
H2
P33
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-233-1
Document Type: 
Working Paper

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