The paper aims to investigate the possible crowding‐out of regular development aid by global taxes.
The paper models cross‐country interactions in aid giving using a simple Cournot‐Nash framework.
The paper argues that global taxes could lead to an increase in aid‐cum‐tax revenue if such taxes produce a globally net positive income effect. Whether this condition can be satisfied is very much an open empirical issue. An alternative to global taxes is cooperative aid‐giving among donors, which this paper shows will always result in more global aid.
The paper highlights the need for a shift of policy focus from designing global taxes to designing viable mechanisms for effective aid coordination, for which multilateral institutions could play a crucial role.
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