As the world enjoys greater financial globalization, developing countries continue to accumulate sovereign debts. Despite the promise of sovereign debt to raise national output, and improve the lives of the “have-nots”, income inequality has widened and continues to rise within and among countries. This is suggestive of debt that undermines justice in the distribution of incomes. This essay analyzes the extent to which accumulation of sovereign debt affected income inequality in the East African region. The global financial crisis evidenced in the year 2008 serves as a benchmark. The analysis covers the period from 1996 to 2022. The system generalized method of moments reveals that accumulation of debt was overbearing among the poorest 10percent. Income inequality rose as debt increased, suggesting that as the stock of debt rose, incomes among the poorest decile decayed faster than incomes among the richest 10percent. This effect was dampened by the global financial crisis.

This paper examines the impact of international tourism on tax revenues in African countries using data from 1990 to 2020 and an instrumental variable fixed effects model. The study finds that tourism receipts have a positive and significant effect on nearly all tax revenues, except personal income tax. Additionally, this impact is influenced by factors such as income level, institutional stability, and the presence of a coastline, indicating that advanced economies with stable institutions and coastal access benefit more from tourism. The results suggest that African governments should implement clear tourism development strategies to enhance infrastructure and destination competitiveness. Furthermore, strengthening tax administrations is recommended to fully capture the economic benefits of tourism. Overall, international tourism is portrayed as a vital tool for diversifying African economies, creating jobs, and reducing the size of the informal sector.

This paper evaluates the administrative costs of delivering social protection programmes in Sub-Saharan Africa and Latin America, integrating real-world estimates into SOUTHMOD tax-benefit microsimulation models. We focus on five programme types—means-tested, proxy-means-tested, non-means-tested, and in-kind benefits as well as public works—and assess how administrative costs shape total spending and reduce the effectiveness of poverty reduction efforts. Our findings show that, even with large overhead, means-tested cash benefits achieve the greatest gains in lowering poverty per budget dollar. Meanwhile, programmes with more complex delivery, namely in-kind transfers, tend to incur higher administrative expenses that diminish their cost effectiveness. Public works initiatives also face overhead but can deliver robust results. Non-means-tested cash benefits are simpler to administer but frequently reach broader population groups than intended. By including administrative costs, policymakers can form clearer budget plans that balance programme design choices against their real impact on fiscal sustainability and social goals.

This paper provides novel evidence on the impact of a prominent place-based policy - Special Economic Zones (SEZs) - on the economic well-being of African households. Exploiting time variation in SEZ establishment on a dataset of repeated cross-sections of households in 10 African countries during 1990-2020, we show that households living near SEZs become wealthier relative to the national average after SEZ establishment. The effect accrues mostly within 10 km of SEZs, is not driven by selective migration, and is accompanied by improved access to household utilities, higher consumption of durable goods, increased educational attainment and a shift away from agricultural activities.

When nearby regions have different tax rates, residents may travel to shop in the lower tax rate region. The extent of this activity is captured by the tax elasticity of border sales (TEBS). We collect 749 estimates of TEBS reported in 60 studies, and conduct the first meta-analysis of this literature. We show that the literature is prone to selective reporting: positive estimates are systematically discarded. Sales of food, retail and fuel are more elastic compared to sales of tobacco and other individual ‘sin’ products. Cross-border shopping is more prominent in the US—compared to Europe and other countries.

The relationship between taxation and trade is complex, with far-reaching implications. This paper explores strategies to support tax administration in West Africa. By combining micro and macro data, we found that trade integration can impact tax revenue, consistent with existing economic integration literature. However, our analysis also revealed weak institutional collaboration in managing trade-tax complexities. Notably, domestic tax departments in sampled West African countries showed limited understanding of the African Continental Free Trade Area (AfCFTA), whereas customs departments demonstrated greater awareness and capacity. To address these challenges, capacity-building strategies for revenue and trade officials should include training on optimal tax and trade policy design.

This paper examines the macroeconomic and welfare impacts of various tariff scenarios using a four-region dynamic general equilibrium model with a multi-sectoral production network. The scenarios include unilateral US tariffs, coordinated US-EU tariffs, Chinese retaliation, Europe's non-participation, and sector-specific versus broad tariffs.

Our results show that tariffs initially boost domestic output by making local goods cheaper. While consumption increases permanently, the output benefits are short-lived. Increased production costs and reduced global income negate the output gains over time. China has an incentive to retaliate and when it does so, welfare losses deepen for the affected partners. Additionally, the rest of the world suffers from reduced aggregate income regardless of direct involvement in tariff conflicts. Sector-specific tariffs are found to be less effective than broad tariffs by failing to protect non-targeted industries. Overall, tariffs appear inefficient for economic protection due to the high possibility of retaliation.

The European Union’s sanctions against Russia following the Ukraine invasion have reshaped global trade dynamics. While direct effects on sanctioning and sanctioned countries are intuitive, little is known about the effects on neutral third-party nations like South Africa. This study examines trade diversion and round-tripping of sanctioned products to and through South Africa using detailed administrative trade data. Moreover, we explore the effects of such trade at the firm and worker level via linked employer-employee data. Using a series of event studies, we analyze monthly transaction-level 6-digit product-level trade flows, revealing shifts in import and export patterns in South Africa and direct and indirect sanction parties.

We use variation in marginal tax rates and in tax bracket thresholds at which they apply in order to identify the substitution and income effects of tax reforms. We use a triple-difference estimator that exploits variation from subnational tax reforms, for which behavioral responses to taxes are identified even in the presence of unobservable shocks to the income distribution. While high-income taxpayers respond more to tax changes, our results suggest this reflects much more the income or salience effects of tax reforms, rather than inherent heterogeneity in substitution effects. We discuss the implications for optimal redistributive tax policies.

This paper develops a general framework to construct optimal policy reforms starting from a status quo set of policies. We show that if a policymaker can control how fiscal externalities are spent, then the welfare-weighted marginal value of public funds (WMVPF) is the relevant sufficient statistic for determining optimal policy reforms. If a policymaker cannot control how fiscal externalities are spent, then the welfare-weighted net social benefit (WNSB) is the relevant sufficient statistic. If a policymaker can control how a fraction of fiscal externalities are spent, then the relevant sufficient statistic is an "augmented internal WMVPF" consisting of an "internal WMVPF" plus an "external correction" term. We provide a number of stylized examples to illustrate how and when in practice to use the WMVPF versus the WNSB to determine optimal policy reforms.

This paper evaluates Laffer curves produced by reforms to nonlinear income taxes, focusing on individual taxpayers. A reform puts a taxpayer on the “wrong” side of the Laffer curve if it increases their tax burden while reducing tax payments. There always exist potential reforms with this property – and in particular, tax increases restricted to high-income taxpayers are guaranteed to consign some to the wrong side of the Laffer curve. The original design of the 2024 Australian tax reform would have put 15% of the taxpaying population on the wrong side of the Laffer curve, though subsequent modifications reduced this to 5%. Standard tax progressivity measures that ignore the endogeneity of taxable income generally understate the redistributive impact of progressive tax reforms.

This study examines optimal government redistribution in a Mirrleesian framework, accounting for a negative effect of longer working hours on productivity. A government ignoring this effect perceives labor supply as insufficient and sets lower marginal income taxes to encourage work. In contrast, a government recognizing the endogenous relationship between productivity and labor supply redistributes more. However, the resulting marginal taxes are still lower than those predicted by standard models where productivity is independent of working hours.

We ask how externalities should be taxed when redistribution is costly. In our model, the government raises revenue using distortionary income and commodity taxes. If more or less productive people have identical tastes for an externality-generating activity, the government optimally imposes a Pigouvian tax equal to marginal damage from the externality, regardless of whether the tax is regressive. But if regressivity partly reflects different preferences across incomes, the tax optimally deviates from the Pigouvian benchmark to help redistribute income efficiently. The overall tax may be higher or lower, and may even reverse sign relative to the externality. We derive sufficient statistics for optimal policy and use them to study carbon taxation in the US. Throughout most of the income distribution, our empirical results imply an optimal carbon tax below marginal damage, but this reverses for high earners. Allowing heterogeneity within and across incomes attenuates schedules toward the Pigouvian benchmark.

This study examines the potential impacts of carbon taxation on Belgium’s economy, focusing on emissions reduction and fostering innovation. As a strong EU innovator, Belgium has yet to implement a carbon tax, despite falling short of its climate targets. Using a computable general equilibrium (CGE) model calibrated with a detailed Social Accounting Matrix (SAM) for Belgium, the research explores varying carbon tax levels and revenue recycling strategies, including innovation subsidies and labour tax reductions. The model captures the dynamic interplay between economic activity, sectoral transitions, emissions, and R&D investments. By integrating innovation dynamics into the CGE framework, this study offers a forward-looking analysis of how carbon taxes can support technological progress and economic resilience. The results aim to provide actionable insights for policymakers designing equitable environmental policies that balance decarbonization with economic competitiveness.

Fuel and vehicle taxes are key revenue sources in sub-Saharan Africa (SSA) and play a role in addressing externalities such as congestion, air pollution, and road damage. This paper draws on a new database covering fuel and vehicle taxes in 38 SSA countries, tracking reforms since 2014. The findings show that these taxes are poorly aligned with environmental objectives: most revenue comes from up-front vehicle purchase taxes, which are least effective at targeting externalities from vehicle use. Since 2014, purchase taxes have grown in importance as fuel taxes have lagged behind inflation. While some purchase taxes include environmental elements—such as higher rates for vehicles with larger engines—most countries tax expensive but cleaner vehicles more than cheaper, dirtier ones. Cars face much higher taxes than buses and trucks, creating loopholes for vehicles on the boundary, such as pickup trucks.

Climate change and energy poverty in low- and middle-income countries are global challenges that are sometimes in tension with each other. This paper analyzes a randomized intervention that addresses both: distribution of solar lights to replace kerosene lamps. The solar lights strongly reduce carbon emissions from kerosene by half, while at the same time lowering household expenditures and improving health and subjective wellbeing. Providing lights for free, rather than charging a co-pay, boosts take-up without lowering usage. Access to solar lights can therefore be a highly cost-effective climate intervention, which at the same time increases the welfare of the poor.

The role of interactions between taxpayers and tax officials in shaping compliance strategies remains unexplored in the literature on tax administration and compliance in developing countries. Nevertheless, practically, taxpayers' experience is shaped by interactions with those who implement tax laws: tax officials. Drawing on a survey of small and medium Rwandan businesses, we provide descriptive and causal evidence into taxpayer experiences and the impact of tax officials’ attitudes and behaviours on taxpayers’ perceptions. A vignette experiment proves that interactions shape compliance attitudes. Facilitation-based interactions improve trust and perceptions of professionalism, while enforcement-focused interactions deteriorate tax morale and respect for the tax administration. Moreover, a population-wide survey of Rwandan tax officials explores how taxpayer characteristics influence officials’ attitudes. A conjoint experiment confirms that tax officials favour more knowledgeable businesses and distrust larger, wealthy taxpayers. The analysis highlights taxpayer knowledge and facilitation efforts as key to improving compliance through healthier taxpayer-administration interactions.

We report the results of a text message campaign to promote tax compliance among landowners in Dar es Salaam, Tanzania. Landowners were randomly assigned to one of four groups designed to test different aspects of tax morale. They received a simple text message reminder to pay their tax (a test of salience), a message highlighting the connection between taxes and public services (reciprocity), a message communicating that people who did not pay were not contributing to local or national development (social pressure), or no message (control).

Recipients of any message were 18 percent more likely to pay any property tax by the end of the study period. Total payment amounts were highest for recipients of reciprocity messages. The average estimated benefit-cost ratio across treatments is 36:1 due to the low cost of the intervention, with higher cost-effectiveness for reciprocity messages. Significant geographic heterogeneity in treatment effect sizes and estimated cost-effectiveness were observed.

Tax audits are essential for governments to raise revenue but can create economic distortions. To avoid an audit, firms may remain small, move to the informal sector, or shut down. Leveraging administrative tax data from the Ugandan Revenue Authority (URA), a novel linked survey, and a regression discontinuity design (RDD), we show that audits have a dual negative effect: They reduce the tax revenue collected from audited firms and impose large economic distortions. Audited firms are 11 percentage points likelier to shut down, and those that remain operational reduce their output. Back-of-the-envelope calculations indicate that the overall revenue collected from audited firms declines. The total wage bill loss induced by the audits is equivalent to 0.2-0.6% of the total wage bill of the formal economy at baseline, suggesting that the auditing process potentially imposes a large distortion to the Ugandan economy.

Using RCTs in a natural field experiment, tax debtors received emails from the tax authority regarding tax amnesty. We test the impact of nudging sentences and sequences of nudges. We find all treatments to be effective than no communication. Effect sizes increased with nudge sequencing in subsequent reminders. Effects size on uptake averaged 0.7 percentage points in the first two rounds, increasing to 9.6 percentage points in the third round. Further, information treatment is found to be as effective as nudging, except for the deterrence treatment. On payment outcomes, those who acted in the first or second round paid more on average than those in the third, with average effect sizes of 2.5% and 1.4% compared to the no email group. We contribute to tax compliance literature by focusing on the tax amnesty context, nudge sequencing and, provide empirical insights for designing effective compliance strategies in developing countries.

The integration of domestic firms into the mining global value chain (GVC) can bolster local economies, yet the scale and impact of these linkages remain unclear. This study examines the mining value chain in Kitwe, a key mining hub in Zambia’s Copperbelt. Ten years of VAT data on domestic purchases and imports reveal that mine suppliers adjust both their domestic and international procurement in response to fluctuations in the international copper price. Our cross-sectional firm survey reveals GVC integration is of strong interest among local firms. Ultimately, Zambia faces a double-edged sword: while local firms seek deeper integration into the mining GVC to boost revenue, profits, exports, and employment, the financialization of the global copper trade ties Zambia to the volatility of commodity prices. Thus, the government must ensure optimal backward linkages between local firms and mines to foster resilient, non-resource-dependent growth and maximize VAT, tariff, and income tax revenue.

Disillusionment with income as a measure of well-being has led to alternative measures that are broader and focus on outcomes. Deaton (2008), among others, espouses a measure of well-being called life evaluation/satisfaction that aggregates components of well-being, such as economic status, health, family circumstances and even human and political rights. We have used this measure of life evaluation. As there is no study of the relationship between life evaluation and trust in the present Indian government/National Democratic Alliance (NDA), led by the Bhartiya Janata Party (BJP), our present study aims to fill this gap, based on the Gallup World Poll Survey for India, covering the period 2018-2021. As trust in the NDA is endogenous, 2SLS and Lewbel IV estimators have been used. Our analysis confirms robustly that trust in the NDA determines life evaluation, controlling for other covariates. As trust in the NDA decreased over the period analysed, so did the life evaluation

Based on a new granular and exhaustive dataset on effective payments made by listed extractive (mining, oil & gas) firms to governments worldwide, we find that a 1% increase in commodity prices leads to a 0.3% increase in fiscal windfalls for states. We find that rich source countries benefit from a higher proportional increase of their fiscal windfalls than lower-income countries during commodity price increases. This result indicates that tax systems in lower-income countries favor more stable revenues at the expense of benefiting more from commodity price booms. The revenue implications may be substantial in contexts of commodity price booms.