The Arab Spring

This paper presents statistical analysis supporting stylized facts about sovereign wealth funds (SWFs). It discusses the forces leading to the growth of SWFs, including the role of fuel exports and ongoing current account surpluses, and large hoarding of international reserves. It analyzes the degree to which measures of SWF governance and transparency compare with national norms of behavior. We provide evidence that many countries with SWFs are characterized by effective governance but weak democratic institutions, as compared to other nonindustrial countries. We also present a model with which we compare the optimal degree of diversification abroad by a central bank versus that of a sovereign wealth fund. We show that if the central bank manages its foreign assets with the objective of reducing the probability of sudden stops, it will place a high weight on the downside risk of holding risky assets abroad and will tend to hold primarily safe foreign assets. In contrast, if the sovereign wealth fund, acting on behalf of the Treasury, maximizes the expected utility of a representative domestic agent, it will opt for relatively greater holding of more risky foreign assets. We discuss how the degree of a country's transparency may affect the size of the foreign asset base entrusted to a wealth fund's management, and show that, for relatively low levels of public foreign assets, assigning portfolio management independence to the central bank may be advantageous. However, for a large enough foreign asset base, the opportunity cost associated with the limited portfolio diversification of the central bank induces authorities to establish a wealth fund in pursuit of higher returns.

Sovereign wealth funds: stylized facts about their determinants and governance

Resource rich countries need to look beyond the so-called resource curse and put into action innovative policies and institutions to confront their many challenges and reap the benefits of widely shared natural resource wealth. There is a broad consensus in academic and policy circles that the presence of natural resources poses a number of potential challenges in resource rich countries:
A loss of competitiveness in potentially dynamic, non-natural resource sectors leading to a narrowing of the production base,
Excessive government reliance on revenues derived from commodities and export earnings,
Too much macroeconomic and financial volatility, and
Rent-seeking behavior that can undermine governance and exacerbate the difficulty of building robust, growth-enabling institutions.
Our recent edited book (Arezki, Gylfason and Sy, 2012) assembles contributions from several authors discussing the fiscal, monetary and exchange rate policy options confronting resource rich countries, savings policies, suitable institutional arrangements to safeguard the economy against volatility, economic as well as political diversification, and institution building.

https://www.elibrary.imf.org/downloadpdf/books/071/11818-9781616351458-en/11818-9781616351458-en-book.pdf

Beyond the Curse: Policies to Harness the Power of Natural Resources

Digital technologies, hyper-transparency and smallholder farmer inclusion in global value chains

The present study examines the long-run and short-run relationship between tax structure and state-level growth performance in India for the period 1991–2016. The analysis in this paper is based on the model of Acosta-Ormaechea and Yoo (2012), and for the verification of the relationship between taxation and economic growth the panel regression method is used. With the use of 14 Indian states data, Panel Pool mean group estimation indicates that income tax and commodity–service tax have negative effects whilst property and capital transaction tax have a significant positive effect on state economic growth. This study finds ‘U’ shape relationship between tax structure and growth performance. Based on the analysis, we conclude that for faster growth of Indian states, policymakers should give more focus on property taxes along with the reduction in income taxes.

/pdf/tax-structure-and-economic-growth-a-study-of-selected-indian-orq1qyy1r8.pdf

Tax structure and economic growth: a study of selected Indian states

This study uses the ICTD UNU-WIDER Government Revenue Dataset in order to challenge and extend existing findings on the relationship between tax structures and economic growth, in a panel of 100 countries. The results suggest that, broadly, revenue-neutral increases in income taxes are associated with lower long-run GDP growth and that revenue-neutral reductions in trade taxes have not always had positive effects. Crucially, many of the results presented differ according to income level, calling into question the validity of existing findings for developing countries and suggesting that policy advice on this issue in developing countries should be viewed through a more cautious lens. © 2018 UNU-WIDER. Journal of International Development published by John Wiley & Sons, Ltd.

/pdf/tax-structures-and-economic-growth-new-evidence-from-the-3yqtuv9ax7.pdf

Tax Structures and Economic Growth: New Evidence from the Government Revenue Dataset

The Government Revenue Dataset (GRD) was launched in September 2014 and, in the few years since, has gone on to be recognized as the go-to source for researchers and policymakers seeking cross-country data on government revenues and taxes. However, as with any such project, successive rounds of updates have led to new challenges. This paper describes in depth some of the changes compared to older versions of the GRD, which are the result of learning during the update process, user feedback and changes to the underlying source data. It is not the intention to repeat the original motivations behind the dataset; these are covered in depth in Prichard et al. (2014). Particular attention is paid to the nuances of (i) how social security contributions are recorded in the OECD Revenue Statistics and IMF’s Government Finance Statistics (GFS) (ii) the treatment of VAT or excises collected on imports and the classification of some property taxes.

/pdf/toward-closer-cohesion-of-international-tax-statistics-the-1jxahpjln9.pdf

Toward closer cohesion of international tax statistics: The ICTD/UNU-WIDER GRD 2017

This paper argues that in weak states, leaders whose hold on power is secured by the public fortune have turned to the use of sovereign wealth funds (SWFs), especially unofficial SWFs, to cement their hold on power. Unofficial SWFs are private funds created from resource rents with the appearance of public investment-holding firms that use governmental legitimacy to invest at home and abroad, managed indirectly by political leaders or their families in order to advance a political agenda, wealth accumulation, patronage, repression, and loyalty.

/pdf/unofficial-sovereign-wealth-funds-and-duration-in-power-in-5bawxvkead.pdf

Unofficial sovereign wealth funds and duration in power in Africa

Drawing on first-hand data collected from a household survey in urban Benin, we examine membership in two types of informal groups that display the characteristics of a commitment device: R...

/pdf/time-preferences-and-commitment-devices-evidence-from-roscas-3jy2r1fq2y.pdf

Time preferences and commitment devices: evidence from ROSCAs and funeral groups in Benin

Using data from a unique field survey in urban Benin, we investigate the sustainability of Rotating Savings and Credit Associations (ROSCAs) over time. We test the theories from the relevant literature that suggest that ROSCAs can be designed in a manner that minimizes the likelihood of enforcement problems occurring. The data paint a picture of inherent instability: over a 2-year period, one in three groups experienced enforcement problems; two-thirds of which collapsed. The results highlight the importance of the order of pot allocation, ruling structure, and social connectedness in minimizing the risk of enforcement problems occurring. Repeated interactions among members can also enhance sustainability over time.

/pdf/enforcement-problems-in-roscas-evidence-from-benin-4evyoho1ws.pdf

Kyle McNabb

Papers

Tax Structures and Economic Growth: New Evidence from the Government Revenue Dataset

Toward closer cohesion of international tax statistics: The ICTD/UNU-WIDER GRD 2017

Unofficial sovereign wealth funds and duration in power in Africa

Time preferences and commitment devices: evidence from ROSCAs and funeral groups in Benin

Enforcement Problems in ROSCAs: Evidence from Benin