Aiding dependency : a cross-national analysis of foreign aid and tax compliance



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This dissertation investigates whether foreign aid helps or hinders the development of state capacity through its influence on tax compliance. The dissertation argues that tax compliance is the product of a bargaining process between the state and citizenry, which aid can disrupt by lowering the incentive for states to collect taxes and the incentive for people to pay them. To test this argument, a new dataset of sub-national foreign aid in Uganda is used to show that aid lowers tax compliance. These findings are supported with data gathered during fieldwork in Uganda in April and May 2015, and then the findings are generalized through a cross-national analysis of the relationship between aid and tax compliance.