The Causality between Taxes and Public Expenditure in Mauritius,1970-1999: A VECM Approach

While this paper tries to fill a particular niche in the literature on the tax and spend nexus of the public sector, it provides new insights on the causality between public expenditure and public revenue from a small island developing economy perspective. We apply the Johansen technique to uncover the dynamics characterising the public sector’s decision–making process with respect to taxing and spending. In particular, data covering the period 1970-1999 are used to test this causal link by applying a Vector Error Correction Mechanism (VECM). It is found that unidirectional causality runs from public revenue to public expenditure. This result, which is consistent both in the short run and the long run, implies that the government taxes first and then spends. Further, an important implication of our result is that the lack of evidence in favour of fiscal synchronization (bi-directional causality between tax and spend) would make it easier for the fiscal authority to dictate either its revenue or spending plans, hence making fiscal policy a stable and an effective tool for demand management in Mauritius.Macroeconomics of Public Finance, Macroeconomic Policy, National Budget, Deficit and Debt

Reinventing foreign aid for inclusive and sustainable development: a survey

This survey essay reviews over 200 papers in arguing that in order to achieve sustainable and inclusive development, foreign aid should not orient developing countries towards industrialisation in the perspective of Kuznets but in the view of Piketty. Abandoning the former’s view that inequality will fall with progress in industrialisation and placing more emphasis on inequality in foreign aid policy will lead to more sustainable development outcomes. Inter alia: mitigate short-term poverty; address concerns of burgeoning population growth; train recipient governments on inclusive development; fight corruption and mismanagement and; avoid the shortfalls of celebrated Kuznets’ conjectures. We discuss how the essay addresses post-2015 development challenges and provide foreign aid policy instruments with which discussed objectives can be achieved. In summary, the essay provides useful policy measures to avoid past pitfalls. ‘Output may be growing, and yet the mass of the people may be becoming poorer’ (Lewis, 1955). ‘Lewis led all developing countries to water, proverbially speaking, some African countries have so far chosen not to drink’ (Amavilah, 2014). Piketty (2014) has led all developing countries to the stream again and a challenging policy syndrome of our time is how foreign aid can help them to drink

Perceptions of climate change, multiple stressors and livelihoods on marginal African coasts

Studies of multiple stressors in Africa often focus on vulnerable inland communities. Rising concentrations of the world’s poor live in coastal rural–urban areas with direct dependencies on marine as well as terrestrial ecosystem goods and services. Using participatory methods we elicited perceptions of stressors and their sources, impacts and consequences held by coastal communities in eastern Africa (Mtwara in Tanzania and Maputo in Mozambique). Respondent-informed timelines suggest wars, economic policies and natural increase have led to natural resource-dependent populations in marginal, previously little-inhabited lowland coastal areas. Respondents (n = 91) in interviews and focus groups rank climate stressors (temperature rise/erratic rain) highest amongst human/natural stressors having negative impacts on livelihoods and wellbeing (e.g., cross-scale cost of living increases including food and fuel prices). Sources of stress and impacts were mixed in time and space, complicating objective identification of causal chains. Some appeared to be specific to coastal areas. Respondents reported farms failing and rising dependence on stressed marine resources, food and fuel prices and related dependence on traders and credit shrunk by negative global market trends. Development in the guise of tourism and conservation projects limited access to land–sea livelihoods and resources in rural–urban areas (coastal squeeze). Mental modelling clarified resource user perceptions of complex linkages from local to international levels. We underline risks of the poor in marginal coastal areas facing double or multiple exposures to multiple stressors, with climate variability suggesting the risks of climate change

Democracy and economic growth in Sub-Saharan Africa: A panel data approach

This paper studies the link between democracy and economic development for 28 countries of Sub-Saharan Africa for the period 1980-2005 in a panel data framework. A democracy index constructed from the Freedom House indices. A variety of panel data unit root and cointegration tests are applied. The variables are found to be integrated of order one and cointegrated. The Blundell-Bond system generalized methods-of-moments is employed to conduct a panel error-correction mechanism based causality test within a vector autoregressive structure. Economic growth is found to cause democracy in the short-run, while bidirectionality is uncovered in the long-run. In addition, the long-run coefficients are estimated through the panel fully modified ordinary least squares and dynamic ordinary least squares methods. Democracy has a positive impact on GDP and vice versa. These results lend support to the virtuous cycle hypothesis. © 2012 Springer-Verlag

Chinese economic expansionism in Africa: A theoretical analysis of the environmental Kuznets Curve Hypothesis in the forest sector in Cameroon.

This paper, which is conceptually located at the intersection of trade–economics, resource politics, and environmental assessment, is a narrative-analytic review of Chinese economic expansionism in Africa especially its quest for the continent’s natural resources in the past 10 years. We seek to examine the environmental, ecological, and sociopolitical impacts of the current China–Africa engagement within the context of the Environmental Kuznets Curve (EKC) hypothesis. The EKC hypothesis posits that an inverted U-shape relationship exists between economic growth and environmental quality. This implies that the quality of a country’s environment will initially decrease due to its economic growth, but will soon start to improve when the country attains a certain threshold level of economic development/income per capita. We argue that by virtue of its ‘omission’ and/or ‘commission’ factors, the EKC hypothesis can be misleading if not dangerous. Using the case study of China’s engagement with Cameroon in the forest sector, the paper illustrates the high threshold level of economic development/income per capita that is required before the quality of the country’s environment can begin to improve. The paper ends with the environmental, ecological, and sociopolitical impacts of Chinese involvement in the Cameroonian forest sector and concludes that this engagement and the larger Chinese economic expansionism in Africa under current trading conditions is fairly detrimental to the welfare of African peoples and their environment