Hostname: page-component-848d4c4894-4hhp2 Total loading time: 0 Render date: 2024-06-01T20:33:21.685Z Has data issue: false hasContentIssue false
  • English
  • Français

Remittance dependence, support for taxation and quality of public services in Africa

Published online by Cambridge University Press:  15 December 2023

Maty Konte Open the ORCID record for Maty Konte [Opens in a new window]  and
Gideon Ndubuisi
Maty Konte*
Affiliation:
World Bank/International Finance Corporation, Washington, DC, USA
Gideon Ndubuisi
Affiliation:
Delft University of Technology, Delf, The Netherlands UNU-MERIT, Maastricht University, Maastricht, The Netherlands
*
Corresponding author: Maty Konte; Email: mkonte@ifc.org
Get access Rights & Permissions [Opens in a new window]

Abstract

We explore the heterogeneous effect of migrant remittances on citizens' support for taxation using a sample comprising 45,000 individuals from the Afrobarometer survey round 7 [2016–2018] across 34 African countries. To correct for unobserved heterogeneity, we endogenously identify latent classes/subtypes of individuals that share similar patterns on how their support for taxation is affected by their unobserved and observed characteristics, including remittance dependency. We apply the finite multilevel mixture of regressions approach, a supervised machine learning method to detect hidden classes in the data without imposing a priori assumptions on class membership. Our data are best generated by an econometric model with two classes/subtypes of individuals. In class 1 where more than two-thirds of the citizens belong, we do not find any significant evidence that remittance dependence affects support for taxation. However, in class 2 where the remaining one-third of the citizens belong, we find a significant negative effect of remittance dependence on support for taxation. Furthermore, we find that citizens who have a positive appraisal of the quality of the public service delivery have a lower probability of belonging to the class in which depending on remittance reduces support for taxation. The findings emphasize the need for efficient public services provisioning to counteract the adverse effect of remittances on tax morale.

Keywords

Africapublic servicesremittancetax moraletaxationJEL: D01H41O55
Type
Research Article
Information
Journal of Institutional Economics , Volume 20 , 2024 , e7
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press on behalf of Millennium Economics Ltd.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abdih, Y., Chami, R., Dagher, J. and Montiel, P. (2012). Remittances and institutions: Are remittances a curse? World Development 40(4), 657–666.CrossRefGoogle Scholar
Abel, G.J. and Cohen, J.E. (2019). Bilateral international migration flow estimates for 200 countries. Scientific data 6(1), 82.CrossRefGoogle ScholarPubMed
Acevedo, J. (2020). Migrant remittances and demand for redistribution. Studies in Comparative International Development 55(4), 403–435.CrossRefGoogle Scholar
Adida, C.L. and Girod, D.M. (2011). Do migrants improve their hometowns? Remittances and access to public services in Mexico, 1995–2000. Comparative Political Studies 44(1), 3–27.CrossRefGoogle Scholar
Ahmed, F. (2013). Remittances deteriorate governance. Review of Economics and Statistics 95(4), 1166–1182.CrossRefGoogle Scholar
Ahmed, F.Z. (2017). Remittances and incumbency: Theory and evidence. Economics and Politics 29(1), 22–47.CrossRefGoogle Scholar
Ali, M., Fjeldstad, O. and Sjursen, I.H. (2014). To pay or not to pay? Citizens’ attitudes toward taxation in Kenya, Tanzania, Uganda, and South Africa. World Development 64, 828–842.CrossRefGoogle Scholar
Allingham, M. and Sandmo, A. (1972). Income tax evasion: A theoretical analysis. Journal of Public Economics 1(3/4), 323–338.CrossRefGoogle Scholar
Alm, J. and Torgler, B. (2006). Culture differences and tax morale in the United States and in Europe. Journal of Economic Psychology 27(2), 224–246.CrossRefGoogle Scholar
Alm, J., Jackson, B. and Mckee, M. (1992). Institutional uncertainty and taxpayer compliance. American Economic Review 82(4), 1018–1026.Google Scholar
Anderson, G., Pittau, G., Zelli, R. and Thomas, J. (2018). Income inequality, cohesiveness and commonality in the euro area: A semi-parametric boundary-free analysis. Econometrics 6(2), 15.CrossRefGoogle Scholar
Anelli, M. and Peri, G. (2017). Does emigration delay political change? Evidence from Italy during the Great Recession. Economic Policy 32(91), 551–596.CrossRefGoogle Scholar
Batista, C., Seither, J. and Vicente, P. (2019). Do migrant social networks shape political attitudes and behavior at home? World Development 117, 328–343.CrossRefGoogle Scholar
Bedi, J.K., Jia, S. and Williamson, C.R. (2023). Brain gains: A cross-country study on the relationship between remittances and entrepreneurship. International Journal of Entrepreneurship and Small Business 49(1), 32–62.CrossRefGoogle Scholar
Bertoli, S. and Marchetta, F. (2015). Bringing it all back home – return migration and fertility choices. World Development 65, 27–40.CrossRefGoogle Scholar
Boly, A., Konte, M. and Shimeles, A. (2021). Corruption perception and attitude towards taxation in Africa. Journal of African Economies 30(Supplement_1), i140–i157.CrossRefGoogle Scholar
Chauvet, L. and Mercier, M. (2014). Do return migrants transfer political norms to their origin country? Evidence from Mali. Journal of Comparative Economics 42(3), 630–651.CrossRefGoogle Scholar
Christian, B. (1978). Theories of voluntary exchange in the theory of public goods. Annals of Public & Cooperative Economics 49(1), 3–78.Google Scholar
Deb, P. and Trivedi, P.K. (1997). Demand for medical care by the elderly: A finite mixture approach. Journal of Applied Econometrics 12(3), 313–336.3.0.CO;2-G>CrossRefGoogle Scholar
Dempster, A.P., Laird, N.M. and Rubin, D.B. (1977). Maximum likelihood from incomplete data via the EM Algorithm. Journal of the Royal Statistical Society, Series B 39(1), 1–38.Google Scholar
Doyle, D. (2015). Remittances and social spending. American Political Science Review 109(4), 785–802.CrossRefGoogle Scholar
Duquette-Rury, L. (2014). Collective remittances and transnational coproduction: The 3 × 1 program for migrants and household access to public goods in Mexico. Studies in Comparative International Development 49, 112–139.CrossRefGoogle Scholar
Ebeke, C.H. (2012). Do remittances lead to a public moral hazard in developing countries? An empirical investigation. Journal of Development Studies 48(8), 1009–1025.CrossRefGoogle Scholar
Escriba-Folch, A., Meseguer, C. and Wright, J. (2018). Remittances and protests in dictatorships. American Journal of Political Science 62(4), 889–904.CrossRefGoogle Scholar
Feld, L. and Frey, B. (2007). Tax compliance as the result of psychological tax contract: The role of incentives and responsive regulations. Law and Policy 29(1), 102–120.CrossRefGoogle Scholar
Fjeldstad, O. and Semboja, J. (2001). Why people pay taxes: The case of the development levy in Tanzania. World Development 29(12), 2059–2074.CrossRefGoogle Scholar
Flunger, B., Trautwein, U., Nagengast, B., Ludke, O., Niggli, A. and Schnyder, I. (2019). Using multilevel mixture models in educational research: An illustration with homework research. The Journal of Experimental Education 89, 209–236.CrossRefGoogle Scholar
Germano, R. (2013). Migrants’ remittances and economic voting in the Mexican countryside. Electoral Studies 32(4), 875–885.CrossRefGoogle Scholar
Goodman, G.L. and Hiskey, J.T. (2008). Exit without leaving: Political disengagement in high migration municipalities in Mexico. Comparative Politics 40(2), 169–188.CrossRefGoogle Scholar
Henry, K.L. and Muthén, B. (2010). Multilevel latent class analysis: An application of adolescent smoking typologies with individual and contextual predictors. Structural Equation Modeling 17(2), 193–215.CrossRefGoogle ScholarPubMed
Hug, S. and Spörri, F. (2011). Referendums, trust, and tax evasion. European Journal of Political Economy 27(1), 120–131.CrossRefGoogle Scholar
Ivlevs, A. and King, R.M. (2017). Does emigration reduce corruption? Public Choice 171(3–4), 389–408.CrossRefGoogle Scholar
Kogler, C., Muehlbacher, S. and Kirchler, E. (2015). Testing the ‘slippery slope framework’ among self-employed taxpayers. Economics of Governance 16(2), 125–142.CrossRefGoogle Scholar
Konte, M. (2016). The effects of remittances on support for democracy in Africa: Are remittances a curse or a blessing? Journal of Comparative Economics 44(4), 1002–1022.CrossRefGoogle Scholar
Konte, M. and Ndubuisi, G. (2020). Remittances and Bribery in Africa, New York, NY: Routledge, pp. 179–198.Google Scholar
Kountouris, Y. and Remoundou, K. (2013). Is there a cultural component in tax morale? Evidence from immigrants in Europe. Journal of Economic Behavior & Organization 96, 104–119.CrossRefGoogle Scholar
Lago-Penas, I. and Lego-Penas, S. (2010). The determinants of tax morale in comparative perspective: Evidence from European countries. European Journal of Political Economy 26, 441–453.CrossRefGoogle Scholar
Levitt, P. (1998). Social remittances: Migration driven local-level forms of cultural diffusion. International Migration Review 32(4), 926–948.CrossRefGoogle ScholarPubMed
López García, A.I. (2017). Economic remittances, temporary migration, and voter turnout in Mexico. Migration Studies 6(1), 20–52.CrossRefGoogle Scholar
López García, A.I. and Maydom, B. (2021). Remittances, criminal violence, and voter turnout. Journal of Ethnic and Migration Studies 47(6), 1349–1374.CrossRefGoogle Scholar
López García, A.I. and Maydom, B. (2023). Migrants’ remittances, the fiscal contract and tax attitudes in Africa and Latin America. Political Studies 71(4), 1025–1046.CrossRefGoogle Scholar
López Garcia, A.I. (2018). International remittances, cash transfer assistance and voter turnout in Mexico. Comparative Migration Studies 6(1), 1–22.CrossRefGoogle ScholarPubMed
Luttmer, E.F. and Singhal, M. (2014). Tax morale. Journal of Economic Perspectives 28(4), 149–168.CrossRefGoogle Scholar
Martinez-Vazquez, J. and Torgler, B. (2009). The evolution of tax morale in modern Spain. Journal of Economic Issues 43(1), 1–28.CrossRefGoogle Scholar
Mitra, A., Bang, J.T. and Abbas, F. (2021). Do remittances reduce women's acceptance of domestic violence? Evidence from Pakistan. World Development 138, 105149.CrossRefGoogle Scholar
Musgrave, R. (1939). The voluntary exchange theory of public economy. Quarterly Journal of Economy 53(2), 213–137.CrossRefGoogle Scholar
Muthén, B. and Asparouhov, T. (2009). Multilevel regression mixture analysis. Journal of the Royal Statistical Society: Series A (Statistics in Society) 172(3), 639–657.CrossRefGoogle Scholar
Nikolova, M., Roman, M. and Zimmermann, F. (2017). Left behind but doing good? Civic engagement in two post-socialist countries. Journal of Comparative Economics 45(3), 658–684.CrossRefGoogle Scholar
Rodriguez-Justicia, D. and Theilen, B. (2018). Education and tax morale. Journal of Economic Psychology 64(C), 18–48.CrossRefGoogle Scholar
Russo, F.F. (2013). Tax morale and tax evasion reports. Economic Letters 121(1), 110–114.CrossRefGoogle Scholar
Torgler, B. and Valev, N.T. (2010). Gender and public attitudes toward corruption and tax evasion. Contemporary Economic Policy 28(4), 554–568.CrossRefGoogle Scholar
Traxler, C. (2010). Social norms and conditional cooperative taxpayers. European Journal of Political Economy 26(1), 89–103.CrossRefGoogle Scholar
Tyburski, M. (2012). The resource curse reversed? Remittances and corruption in Mexico. International Studies Quarterly 56(2), 339–350.CrossRefGoogle Scholar
Tyburski, M.D. (2014). Curse or cure? Migrant remittances and corruption. Journal of Politics 76(3), 814–824.CrossRefGoogle Scholar
Wenzel, M. (2005). Motivation or rationalization? Causal relations between ethics, norms, and tax compliance. Journal of Economic Psychology 26, 491–508.CrossRefGoogle Scholar
World Bank (2019). Migration and Remittances: Recent Developments and Outlook. Washington, DC, USA: Migration and Development Brief 31 World Bank.Google Scholar
Zhunio, M.C., Vishwasrao, S. and Chiang, E.P. (2012). The influence of remittances on education and health outcomes: A cross country study. Applied Economics 44(35), 4605–4616.CrossRefGoogle Scholar
Supplementary material: File

Konte and Ndubuisi supplementary material
Download undefined(File)
File 343 KB