nep-dev New Economics Papers
on Development
Issue of 2016‒09‒11
five papers chosen by
Jacob A. Jordaan
Universiteit Utrecht

  1. Measuring Regional Ethnolinguistic Diversity in Sub-Saharan Africa: Surveys vs. GIS By Boris Gershman; Diego Rivera
  2. What Does Aid Do to Fiscal Policy? New Evidence By Jean-Louis Combes; Rasmané Ouedraogo; Sampawende J Tapsoba
  3. Inequality, Gender Gaps and Economic Growth; Comparative Evidence for Sub-Saharan Africa By Dalia S Hakura; Mumtaz Hussain; Monique Newiak; Vimal Thakoor; Fan Yang
  4. Aid-Macroeconomic Policy Environment- Growth Nexus: Evidence from Selected Asian Countries By Saima Liaqat; Temesgen Kifle; Mohammad Alauddin
  5. Does Conditionality Mitigate the Potential Negative Effect of Aid on Revenues? By Ernesto Crivelli; Sanjeev Gupta

  1. By: Boris Gershman; Diego Rivera
    Abstract: This paper compares two approaches to measuring subnational ethnolinguistic diversity in Sub-Saharan Africa, one based on censuses and large-scale population surveys and the other relying on the use of geographic information systems (GIS). The two approaches yield sets of regional fractionalization indices that are moderately positively correlated, with a stronger association across rural areas. These differences matter for empirical analysis: in a common sample of regions, survey-based indices of deep-rooted diversity are much more strongly negatively associated with a range of development indicators relative to their highest-quality GIS-based counterparts.
    Keywords: African development, ethnolinguistic diversity, GIS, subnational analysis
    JEL: O10 O15 Z13
    Date: 2016
  2. By: Jean-Louis Combes; Rasmané Ouedraogo; Sampawende J Tapsoba
    Abstract: Foreign aid is a sizable source of government financing for several developing countries and its allocation matters for the conduct of fiscal policy. This paper revisits fiscal effects of shifts in aid dependency in 59 developing countries from 1960 to 2010. It identifies structural shifts in aid dependency: upward shifts (structural increases in aid inflows) and downward shifts (structural decreases in aid inflows). These shifts are treated as shocks in aid dependency and treatment effect methods are used to assess the fiscal effects of aid. It finds that shifts in aid dependency are frequent and have significant fiscal effects. In addition to traditional evidence of tax displacement and “aid illusion,†we show that upward shifts and downward shifts in aid dependency have asymmetric effects on the fiscal accounts. Large aid inflows undermine tax capacity and public investment while large reductions in aid inflows tend to keep recipients’ tax and expenditure ratios unchanged. Moreover, the tax displacement effects tend to be temporary while the impact on expenditure items are persistent. Finally, we find that the undesirable fiscal effects of aid are more pronounced in countries with low governance scores and low absorptive capacity, as well as those with IMF-supported programs.
    Keywords: Foreign aid;Fiscal policy;Developing countries;Aid flows;Aid and growth;Econometric models;Time series;Foreign aid, Fiscal policy, Tax displacement, Fungibility, Aid illusion.
    Date: 2016–06–09
  3. By: Dalia S Hakura; Mumtaz Hussain; Monique Newiak; Vimal Thakoor; Fan Yang
    Abstract: A growing body of empirical evidence suggests that inequality—income or gender related—can impede economic growth. Using dynamic panel regressions and new time series data, this paper finds that both income and gender inequalities, including from legal gender-based restrictions, are jointly negatively associated with per capita GDP growth. Examining the relationship for countries at different stages of development, we find that this effect prevails mainly in lower income countries. In particular, per capita income growth in sub-Saharan Africa could be higher by as much as 0.9 percentage points on average if inequality was reduced to the levels observed in the fastgrowing emerging Asian countries. High levels of income inequality in sub-Saharan Africa appear partly driven by structural features. However, the paper’s findings show that policies that influence the opportunities of low-income households and women to participate in economic activities also matter and, therefore, if well-designed and targeted, could play a role in alleviating inequalities.
    Keywords: Poverty and inequality;Sub-Saharan Africa;Women's economic conditions;Income inequality;Gender;Low-income developing countries;Economic growth;Panel analysis;Regression analysis;Time series;Income inequality, gender inequality, economic growth, and sub-Saharan Africa
    Date: 2016–06–08
  4. By: Saima Liaqat (Visiting PhD Scholar at University of Queensland, Australia /PhD scholar at University of the Punjab Lahore, Pakistan); Temesgen Kifle (School of Economics, The University of Queensland, St Lucia, Brisbane, Australia); Mohammad Alauddin (School of Economics, The University of Queensland, St Lucia, Brisbane, Australia)
    Abstract: This study empirically investigates aid effectiveness debate in light of Burnside and Dollar (2000) hypothesis that policy environment the recipient country is critically important for aid effectiveness.The data on ten developing countries of South and Southeast Asian region over a period of 1984-2015 form the empirical basis of this investigation. In line with Burnside and Dollar (2000) a policy index is constructed which includes inflation, budget deficit/surplus and openness. Two stage least squares (2SLS) and Generalised Method of Moments (GMM) techniques were employed to test the model. Two major findings resulted from this study. First, aid had a negative impact on economic growth during the study period for the Asian region. Second, there was no evidence to suggest that aid policy interaction had any impact on economic growth implying that the good policy environment is not a condition for economic growth in context of aid effectiveness. This in effect refutes the Burnside - Dollar aid effectiveness hypothesis.
    Keywords: foreign aid, macroeconomic policy, economic growth, Asia
    JEL: F35 O19 O38 P45 O11 O53
    Date: 2016–08–29
  5. By: Ernesto Crivelli; Sanjeev Gupta
    Abstract: This paper assesses whether conditionality in IMF-supported programs has helped offset the potential negative effect of foreign aid on tax revenues. The analysis—carried out on panel data covering 1993–2012 for 111 low- and middle-income countries—shows that growing use of revenue conditionality by low-income countries partially offsets the depressing effect of foreign grants on tax revenue, particularly on taxes on goods and services. The impact of conditionality is strong in countries where aid dependence is high and where institutions are strong, suggesting that revenue conditionality cannot substitute for weak institutions in mitigating the negative effect of aid on tax revenue collection.
    Keywords: Conditionality;Foreign aid;Tax revenues;Fund-supported adjustment programs;Panel analysis;Time series;Foreign aid; Tax revenue reform; structural conditionality
    Date: 2016–07–21

This nep-dev issue is ©2016 by Jacob A. Jordaan. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.