Increasing Public Revenues in West African Economic and Monetary Union Countries: Does Human Capital Matter?

Abstract

The literature on the factors explaining the increase in public revenues, particularly the role of human capital, is less developed. This study contributes to filling this gap by examining the effect of human capital on public revenues in seven (7) WAEMU countries over the period 1995-2018, using the autoregressive distributive lag (ARDL) approach, which is more reliable for studies with small samples. The estimations are carried out the pooled mean group (PMG) error correction technique. To strengthen the robustness of the results, we used the Driscoll-Kraay and Newey‒West standard error techniques. Our results suggest that an increase in human capital is associated with increased public revenues. In addition, GDP per capita growth, urbanization and the degree of trade openness have positive and significant effects on government revenues. On the other hand, corruption has a negative effect on the latter. In light of these results, we highlight the need to invest more in improving educational infrastructure to train a skilled workforce adapted to the challenges of the contemporary world. Furthermore, strengthening the capacities of tax administrations to make them more efficient, transparent and resilient to corruption is crucial.