Publication: Measuring Untapped Revenue Potential in Developing Countries: Cross-Country Frontier and Panel Data Analysis
Loading...
Files in English
467 downloads
Published
2021-09
ISSN
Date
2021-09-17
Editor(s)
Abstract
Efforts aimed at supporting domestic revenue mobilization in developing countries are often designed and evaluated based on empirical indicators, such as revenue-to-GDP ratios, which capture differences in achieved outcomes across countries. This paper studies a complementary approach to estimate domestic revenue potential that also takes into account differences in countries’ fundamental economic structures and constraints associated with different capacities to raise domestic revenues, which are not captured by simple revenue-to-GDP ratios. Specifically, nonparametric data envelopment analysis is applied to estimate domestic revenue potential in a panel of 118 low- and middle-income countries from 2008 to 2019. The analysis addresses the following research questions: (i) How efficient are low-income countries compared with richer countries in mobilizing domestic revenues given the national economic conditions and resources available to each country (ii) What factors account for the variation in relative domestic revenue mobilization efficiency, that is, the fact that some countries generate more revenues than other countries with comparable economic structures The paper discusses the policy implications of the findings and demonstrates how the proposed method can be used to identify countries that are already performing close to their limit and those that still feature large untapped potential for further increasing revenues (and thus likely higher marginal benefits to external support for domestic revenue mobilization). Finally, the paper provides insights on the extent to which existing international support for domestic revenue mobilization is targeted at countries with larger untapped revenue potential.
Link to Data Set
Citation
“Bogetic, Zeljko; Naeher, Dominik; Narayanan, Raghavan. 2021. Measuring Untapped Revenue Potential in Developing Countries: Cross-Country Frontier and Panel Data Analysis. Policy Research Working Paper;No. 9776. © World Bank. http://hdl.handle.net/10986/36284 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication Climate and Social Sustainability in Fragility, Conflict, and Violence Contexts(Washington, DC: World Bank, 2026-01-07)Climate change is widely recognized as a driver of violent conflict, but its broader social effects remain less understood. Ignoring these dimensions risks a vicious cycle where climate policies might undermine socially just adaptation. Evidence is still limited on how climate shocks influence political participation, trust, or migration. This paper helps fill that gap by examining links between climate change, conflict, and social sustainability, with a focus on inclusion, resilience, cohesion, and legitimacy. Using secondary data from 2019–24, the study applies simple correlation-based methods to test three hypotheses on the nature, severity, and composition of these associations. The analysis combines multiple climate impact measures, new conflict classifications, recent social sustainability frameworks, and controls for population and geography. The results reveal strong correlations—not causation—between climate events and contexts of fragility, conflict, and violence. Climate impacts are most pronounced in both national and subnational conflict settings. The study also finds robust links between fragility, conflict, and violence and low levels of social sustainability, reflecting its role as both a driver and consequence of conflict. Some dimensions—such as violent events and insecurity—appear weaker in areas most affected by climate shocks. Two of the hypotheses are supported, and one remains inconclusive.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Institutional Capacity for Policy Implementation: An Analytical Framework(Washington, DC: World Bank, 2026-01-07)State capacity is an important prerequisite for policy implementation, yet at the country level it is difficult to measure, assess, and reform. This paper proposes a focus on institutional capacity: the ability of public institutions to implement the specific policy mandates for which they are responsible. Based on a review of existing literature, the paper defines the different dimensions that compose institutional capacity and groups them into two cross-cutting categories: organizational dimensions (personnel, financial resources, information systems, and management practices) and governance dimensions (transparency, independence, and accountability). The paper proposes measures for organizational and governance dimensions using existing data, shows intra-institutional variation of these measures within countries, and discusses how new data could be collected for better measurement of these concepts. Finally, the paper illustrates how the framework can be used to diagnose the sources of common problems related to weak policy implementation.Publication South Africa’s Fragmented Cities: The Unequal Burden of Labor Market Frictions(Washington, DC: World Bank, 2026-01-08)Using high-resolution administrative, census, and satellite data, this paper shows that South African cities are characterized by spatial mismatches between where people live and where jobs are located, relative to 20 global peers. Areas within 5 kilometers of commercial centers have 9,300 fewer residents per square kilometer than expected, which is 60 percent below the global median. Poor, dense neighborhoods are most affected. In Johannesburg, a 10-percentile increase in distance from the nearest business hub corresponds to a 3.7-percentile drop in asset wealth (a proxy of household wellbeing) and 4.9-percentile drop in employment. In Cape Town, the declines are 4.0 and 3.7 percentiles, respectively. Employment is 87 percent lower in the poorest decile than the richest in Johannesburg and 61 percent lower in Cape Town. These findings suggest that South Africa’s spatial organization of people and economic activity constrains agglomeration and reinforces inequality. This methodology provides a scalable and standardized data-driven framework to analyze spatial accessibility and agglomeration frictions in complex, data-constrained urban systems.Publication Investment in Emerging and Developing Economies(Washington, DC: World Bank, 2026-01-07)The world faces a pressing challenge to meet key development objectives amid slowing growth and rising macroeconomic and geopolitical risks. With the number of job seekers rising rapidly, infrastructure shortfalls continuing to be large, and climate costs mounting, the case for a significant investment push has never been stronger. Yet the capacity to respond in many emerging markets and developing economies has eroded. Since the global financial crisis, investment growth has slowed to about half its pace in the 2000s, with both public and private investment weakening. Foreign direct investment inflows—a critical source of capital, technology, and managerial know-how—have also fallen sharply and become increasingly concentrated, leaving low-income countries with only a marginal share. The risks of further retrenchment are significant, as trade tensions, policy uncertainty, and elevated debt levels continue to weigh on investment. Reigniting momentum will require ambitious domestic reforms to strengthen institutions, rebuild macro-fiscal stability, and deepen trade and investment integration—the foundations of a supportive business climate. At the same time, international cooperation is indispensable. A renewed commitment to a predictable system of cross-border trade and investment flows, combined with scaled-up financial support and sustained technical assistance, is essential to help emerging markets and developing economies—especially low-income countries and economies in fragile and conflict situations—bridge financing gaps and implement the domestic reforms needed to restore investment as an engine of growth, jobs, and development.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Corruption and Government Revenue(Taylor and Francis, 2025-01-14)A large body of literature studies the relationship between corruption and economic outcomes, including government revenue mobilization, but there is little evidence on how this relationship changes during times of crisis. Using a comprehensive panel dataset covering up to 194 countries in the period 1996 to 2020, we find evidence of a negative link between corruption and revenue that is amplified in times of crisis. The amplification appears to be driven by countries with lower average income levels, non-democratic governments, and higher natural resource dependency. Our findings are helpful in assessing different views of corruption offered in the literature. Overall, we find our results to be more consistent with a rent seeking view of corruption whereby, in times of crisis, corruption becomes more pervasive and government revenue declines. In contrast, we find no empirical support for the view that crises represent times of social improvement associated with increases in revenues.Publication The good, the bad, and the ugly(Taylor and Francis, 2023-05-05)Different views of corruption are discussed in the literature, ranging from theories highlighting a positive role of corruption (to ‘grease the wheels’ of an economy) to negative (acting as ‘sand in the wheels’) or even destructive effects of corruption on economic outcomes. The empirical evidence in this context is mixed, with alternative theories being supported by different studies, typically relying on different data sources, time periods, and measures of corruption. In this paper, we assess several alternative views of corruption simultaneously in a single empirical framework. Specifically, we test six prominent hypotheses regarding the role of corruption for government revenues using a comprehensive country-level panel dataset covering 194 countries in the period 1996–2019. Our results help to shed light on the factors that are empirically important in explaining the link between corruption and government revenues, including the role of governance, autocracy, fragile states, and natural resources.Publication Is Escaping the Fiscal Pro-Cyclicality Trap Possible? Evidence from the Middle East and North Africa(Washington, DC: World Bank, 2024-10-28)This paper analyzes fiscal policy cyclicality, with a specific focus on the Middle East and North Africa region, which is known for its significant output volatility. The paper provides new and more granular evidence on the direction, intensity, and specific fiscal sources of cyclicality. Based on annual data covering 184 countries from 2000 to 2022, the findings suggest that there are important differences in the assessment of countercyclical fiscal policy achievements among different fiscal policy variables, across world regions, and also within the Middle East and North Africa region. While the global associations between fiscal cyclicality and income levels have remained relatively stable, countries in the Middle East and North Africa have exhibited diverse performances, some transitioning toward countercyclicality and others moving away from it. The paper also identifies several countries in the Middle East and North Africa that have successfully shifted from procyclical to countercyclical fiscal policy, breaking free from the “fiscal pro-cyclicality trap.” To understand more specific fiscal sources of cyclicality, the paper examines subcomponents of revenues and expenditure. It shows that nontax revenues exhibit a greater degree of procyclicality than tax revenues, and subsidy expenditures tend to be less countercyclical than other fiscal expenditures. This has policy implications and adds a dimension of assessment to subsidies that is not addressed in the literature: subsidies, being less countercyclical than other expenditures in the Middle East and North Africa, do not contribute to macroeconomic stability and long-term growth through this channel, independent of their adverse efficiency, distributional, and fiscal space effects. The paper concludes with a discussion of the implications of these findings, aimed at improving countercyclicality in fiscal policy.Publication Gulf Economic Update, December 2024(Washington, DC: World Bank, 2024-12-09)The Gulf Economic Update (GEU) is the product of the Economic Policy unit for Middle East and North Africa at the World Bank Group. It provides an update on key economic developments and policies in the Gulf Cooperation Council (GCC) countries over the past six months, places them in a longer-term and global context and assesses the implications of these developments and other changes in policy on the outlook for the GCC. Its coverage ranges from the macroeconomy to financial markets to indicators of human welfare and development. It is intended for a wide audience, including policymakers, business leaders, financial market participants, and the community of analysts and professionals engaged in the GCC.Publication Impacts of Energy Efficiency Projects in Developing Countries(Washington, DC: World Bank, 2021-11)Spatial difference-in-differences analysis is used to study the impacts of a large-scale development intervention aimed at improving energy efficiency in Malawi. The estimation strategy takes advantage of the geographical variation in the implementation of different project components and is based on a combination of remote-sensing (satellite) data and national household survey data. The results suggest that a combination of demand-side and supply-side interventions was associated with a statistically significant increase in electricity access, a decrease in the frequency of blackouts, and a switch from traditional fuels to electricity as the main source of energy for lighting (but not for cooking). At the same time, there is no evidence that the intervention caused households to pay more for electricity. The results are consistent with an emerging view in the literature that there are synergies between energy efficiency and energy access, especially in places where the bottleneck to wider electricity access is limited electricity generation capacity rather than the cost of connecting more clients to the grid.
Users also downloaded
Showing related downloaded files
Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication The Energy Transition of the Transition Economies : An Empirical Analysis(World Bank, Washington, DC, 2013-03)The aggregate manufacturing energy intensity of 28 countries in Eastern Europe and Central Asia had declined by 35 percent during 1998-2008. This study reveals strong evidence of convergence: less efficient countries improved more rapidly and the cross-country variance in energy productivity narrowed over time. An index decomposition analysis indicates that energy intensities declined largely because of more efficient energy use rather than shifts from energy intensive to less intensive manufacturing activities. Income growth and energy price increases were the main drivers of the convergence. They dominated the impact of trade, which led to specialization in energy intensive industries.Publication Digital Progress and Trends Report 2023(Washington, DC: World Bank, 2024-03-05)Digitalization is the transformational opportunity of our time. The digital sector has become a powerhouse of innovation, economic growth, and job creation. Value added in the IT services sector grew at 8 percent annually during 2000–22, nearly twice as fast as the global economy. Employment growth in IT services reached 7 percent annually, six times higher than total employment growth. The diffusion and adoption of digital technologies are just as critical as their invention. Digital uptake has accelerated since the COVID-19 pandemic, with 1.5 billion new internet users added from 2018 to 2022. The share of firms investing in digital solutions around the world has more than doubled from 2020 to 2022. Low-income countries, vulnerable populations, and small firms, however, have been falling behind, while transformative digital innovations such as artificial intelligence (AI) have been accelerating in higher-income countries. Although more than 90 percent of the population in high-income countries was online in 2022, only one in four people in low-income countries used the internet, and the speed of their connection was typically only a small fraction of that in wealthier countries. As businesses in technologically advanced countries integrate generative AI into their products and services, less than half of the businesses in many low- and middle-income countries have an internet connection. The growing digital divide is exacerbating the poverty and productivity gaps between richer and poorer economies. The Digital Progress and Trends Report series will track global digitalization progress and highlight policy trends, debates, and implications for low- and middle-income countries. The series adds to the global efforts to study the progress and trends of digitalization in two main ways: · By compiling, curating, and analyzing data from diverse sources to present a comprehensive picture of digitalization in low- and middle-income countries, including in-depth analyses on understudied topics. · By developing insights on policy opportunities, challenges, and debates and reflecting the perspectives of various stakeholders and the World Bank’s operational experiences. This report, the first in the series, aims to inform evidence-based policy making and motivate action among internal and external audiences and stakeholders. The report will bring global attention to high-performing countries that have valuable experience to share as well as to areas where efforts will need to be redoubled.Publication Advancing Cloud and Data Infrastructure Markets(Washington, DC: World Bank, 2024-05-23)“The World Development Report 2021: Data for Better Lives” underscored today’s unprecedented generation and flow of digital data and noted that much of the value remains untapped. To realize the enormous potential, data need to be supported by technologically advanced infrastructure to capture, analyze, share, and use them efficiently and effectively to benefit economies and societies. Cloud and data infrastructure presents the technological means to enable these processes, but the markets for these services are largely located in high-income countries. Countries with limited access to affordable services will lag in the ability to harness at scale the advanced technologies, such as machine learning and artificial intelligence, and to realize the potential corresponding social and economic gains. This report is part of a joint World Bank-IFC effort to support countries on their path to developing these markets. It analyzes the key drivers of cloud and data infrastructure growth in these settings. It examines the business models, policies, and regulatory environment shaping the market trends as data from public and private sectors migrate to the cloud and explores the challenges in attracting investments.Publication Economy Profile of United States(World Bank, Washington, DC, 2017-11-01)Doing Business 2018 is the 15th in a series of annual reports investigating the regulations that enhance business activity and those that constrain it. This economy profile presents the Doing Business indicators for United States. Doing Business presents quantitative indicators on business regulation and the protection of property rights that can be compared across 190 economies; for 2018 United States ranks 6. Doing Business measures aspects of regulation affecting 11 areas of the life of a business. Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation, which is not included in this year’s ranking. Data in Doing Business 2018 are current as of June 1, 2017. The indicators are used to analyze economic outcomes and identify what reforms of business regulation have worked, where and why.