The consequences of Fiscal Episodes in OECD Countries for Aid Supply

This paper contributes to the established literature both on the side of fiscal consolidation (for e.g. Alesina and Perotti 1995; Alesina et al. 2010) and that of aid supplies (for e.g. Mosley 1985; Faini, 2006) by investigating the effects of fiscal episodes in OECD donor countries on their aid effort vis-à-vis the developing countries. We use descriptive statistics provided by Alesina and Ardagna (2010) on episodes of fiscal consolidation and stimuli in OECD countries and regression models to perform this analysis. The study is performed on a sample of 19 OECD DAC countries as well as on sub-samples for robustness check and over the period 1970-2007. Overall, the results suggest that the episodes of fiscal consolidation and the size of these fiscal austerity policies in OECD DAC countries lead to the curtailment of aid effort. Whilst during periods of fiscal expansion, aid expenditures increase, the size of these fiscal expansion policies may have an opposite effect. The fiscal austerity measures currently adopted by OECD DAC countries are likely to result in aid shortfalls to developing countries, with these effects likely be higher in the “Like-minded Donor countries”.foreign aid, Fiscal consolidation, Fiscal stimuli

Productive Capacities, Structural Economic Vulnerability and Fiscal Space Volatility in Developing Countries

The current article has explored the effect of productive capacities (as defined by the United Nations Conference on Trade and Development) and of structural economic vulnerability (as defined by the United Nations) on fiscal space volatility in developing countries. It relies on the definition and measure of fiscal space proposed by Aizenman and Jinjarak (2010; 2011) and Aizenman et al. (2019). To compute the indicator of fiscal space and hence that of fiscal space volatility, fiscal space is considered as the ratio of outstanding public debt to the ‘de facto tax base’, the latter being the number of years of tax revenues needed for a country to repay its debt. Results based on a sample of 116 countries from 2000 to 2018 have revealed that the enhancement of productive capacities is associated with lower fiscal space volatility, while higher structural economic vulnerability heightens fiscal space volatility. On another note, highly vulnerable countries tend to experience a higher negative effect of productive capacities on fiscal space volatility than relatively less vulnerable countries

Effect of Aid for Trade Policy and Regulations on Tariff Policy Volatility: Does Institutional and Governance Quality Matter?

This article investigates empirically the effect of aid for trade policies and regulations on the volatility of tariffs in the recipient countries. The analysis has used an unbalanced panel dataset of 107 countries over the period from 2002 to 2015. The empirical results, based on the two-step system Generalized Methods of Moments (GMM) approach, show that aid for trade policies and regulations influences negatively and significantly tariff policy volatility in recipient countries. Additionally, the findings indicate that the better the institutional and governance quality in recipient countries, the higher is the reducing effect of aid for trade policies and regulations on tariff policy volatility. These results, therefore, suggest that a scale up of aid for trade policies and regulations to, inter alia, build the capacity of policymakers in recipient countries to contribute to reducing tariffs volatility in these countries, which would, in turn, likely benefit donor countries. Furthermore, improving domestic institutions and governance in recipient countries would further enhance the reducing impact of this aid on tariff volatility, which, once again, benefits both the recipient countries and donor countries

Effects of the Utilization of Non-Reciprocal Trade Preferences Offered by QUAD Countries on Economic Growth in Beneficiary Countries

The present article investigates empirically whether non-reciprocal trade preferences (NRTPs) offered by QUAD countries (Canada, the European Union, Japan, and the United States) to developing countries have helped to promote economic growth in the beneficiary countries. Two main blocks of NRTPs are considered here: Generalized System of Preferences (GSP) programs and other trade preferences programs. The analysis used a set of 90 beneficiary countries of NRTPs that are concurrently recipients of development aid over the period of 2002-2018. Using the two-step system generalized method of moments, the analysis indicated that while a higher degree of utilization of each of these two blocks of NRTPs has been associated with a high economic growth rate, development aid enhances this positive effect. This highlights the need for donors to support a development strategy based on the provision of both development aid and NRTPs if they are to help beneficiary countries to promote economic growth. Finally, when the positive economic growth effect of the utilization of NRTPs is higher, the result is a greater country’s share of exports (under preferential tariffs) to QUAD countries out of their total merchandise exports

Effects of Intellectual Property Rights Protection on Services Export Diversification in Developing Countries

The effects of the betterment of enforced intellectual property rights (IPRs) provisions on services export diversification are investigated. The analysis used an unbalanced panel dataset of 76 developing countries over the period of 1970-2014. The empirical analysis is based on the feasible generalized least squares estimator. It suggests that the implementation of weaker IPR protection fosters services export diversification in less developed countries (i.e., those whose real per capita incomes are less than US$1458.60), including those with a low level of export product upgrading. Conversely, in relatively advanced developing countries (countries whose real per capita income exceeds US$ 3356.80), including those with high levels of export product upgrading, the implementation of stronger IPR laws induces greater services export diversification. Finally, the analysis revealed the existence of a non-linear relationship between IPR protection and services export diversification. The implementation of stronger intellectual property laws spurs services export diversification in countries with high degree of IPR protection, especially when IPR protection exceeds a certain level, recorded here as having a score of 1.197. In contrast, in countries with weaker IPR protection, in particular those with IPR protection levels that score less than 0.915, it is rather the implementation of weaker intellectual property laws that promotes services export diversification

Duration of the Membership in the World Trade Organization and Aid for Trade Flows

In examining the effect of membership in the World Trade Organization (WTO) on the amounts of Aid for Trade (AfT) that accrue to developing countries, Lee et al. (2015) (The World Economy, 38, 2015 and 1462) have found that developing country members of the World Trade Organization (WTO) received higher AfT flows than non-WTO developing members. The present paper deepens the analysis by Lee et al. (2015) by investigating the effect of the duration of WTO membership on the amounts of AfT flows that accrue to recipient countries. The duration of membership in the WTO captures both the membership in the WTO and the time spent by a country in the organization. The main argument in this analysis is that the duration of WTO membership matters more than the mere WTO membership for the degree of liberalization in AfT recipient countries’ trade regimes and their participation in international trade, the latter being a critical determinant of the AfT flows supplied by donors. This analysis has relied on a panel dataset of 136 countries over the period from 2002 to 2019, and the two-step generalized method of moments estimator. It has established that countries receive higher AfT flows as their membership duration increases, and the amounts of these resource inflows increase as recipient countries further liberalize their trade regime and further participate in international trade. Additionally, the effect of the duration of WTO membership on total AfT flows depends on donor-countries’ commercial self-interest in recipient countries, including the latter’s economic growth performance and endowment in natural resources

Impact of Multilateral Trade Liberalization on Resource Revenue

This paper investigates the impact of multilateral trade liberalization on resource revenue, using an unbalanced panel dataset comprising 57 countries, including both developed and developing countries, over the period 1995⁻2015. By means of the two-step system Generalized Methods of Moments (GMM) estimator, the empirical analysis suggests that multilateral trade liberalization exerts a negative effect on resource revenue, probably at the benefit of non-resource revenue. However, this effect over the full sample hides a positive effect of multilateral trade liberalization on resource revenue in poorest countries, and a negative effect of multilateral trade liberalization on resource revenue in non-poorest countries of the sample. Additionally, the negative effect of multilateral trade liberalization on resource revenue over the full sample appears to be dependent on the degree of domestic trade liberalization. In fact, multilateral trade liberalization genuinely induces a reducing effect on resource revenue only if countries liberalize their domestic trade regime beyond a minimum level