Taxes, Poverty, Incentives and Market Outcomes in Africa
Saturday, Jan. 7, 2017 1:00 PM – 3:00 PM
- Chair: Bichaka Fayissa, African Finance and Economic Association
Financial Reform, Inclusion and Mobile Money in Nigeria
AbstractThis paper examines the effect of financial literacy on the usage of financial products in Nigeria. In contrast to the previous studies on financial literacy and development using country-level data, by applying comprehensive household survey data over three years, we investigate the determinants of financial development in Nigeria at an individual level. We find that the marginal effects of financial literacy and some demographic characteristics such as employment status and education change significantly pre- and post-banking crisis. Another interesting discovery is that coefficients of financial literacy vary across regions.
The Resilience of the Poor: A Markov Chain Analysis of Heterogeneity in Subjective Poverty
AbstractThis paper studies the dynamics of subjective poverty in urban Ethiopia. Poverty is measured as three points ordinal scales: rich, borderline and poor. We use a multinomial logit Markov chain with alternative specifications of unobserved heterogeneity as a random effect, which depends on: households and poverty departure state, household and transition poverty profile, and household heterogeneity only. We identify transitory and permanent effects, and frame-of-reference bias. We find that (i) human capital is a strong determinant of upward poverty, with intensity effect: the higher the level of schooling, the lower the probability of transiting to poor state; (ii) larger households enjoy greater economies of scale but the demographic structure of households matters; (iii) social capital has a positive effect on the downward mobility of poverty; (iv) own consumption raises self-welfare rating; (v) the initial level of poverty is an important determinant of future poverty.
Tax-Man’s Dilemma: Coercion or Persuasion? Evidence from Randomized Field Experiment in Ethiopia
AbstractWe analyze data from a randomized controlled trial of two innovative anti-tax evasion schemes in Ethiopia that signal threats of audit and complimentary messages that encourage tax morale. Our results indicate that the threat of audit reduces tax evasion significantly, and its effect is higher in businesses commonly suspected of high tax evasion rates. We also find that appealing to the tax morale promotes compliance, but slightly less than that of audit threat. The possibility that appeal to tax morale could reduce tax evasion is interesting, but it may also be picking up perception of high risk of being “identified” by the tax authority induced by the experiment. Our results are robust to different estimation strategies and less sensitive to potential confounding factors.
- H2 - Taxation, Subsidies, and Revenue
- O1 - Economic Development