Evaluating fiscal effort in heterogeneous contexts using a conditional nonparametric frontier approach

The aim of this paper is the estimation of a measure of the fiscal effort made by certain countries taking into account the heterogeneous contexts in which they operate over a ten-year period (2002-2011). To do this, we adopt a conditional efficiency approach that allows for accounting for those different environments in the estimation efficiency measures that we interpret as relative measures of fiscal effort. The results show that many countries labelled as inefficient in an initial analysis without considering their context become efficient when contextual variables are taken into account. There is a rather pronounced upward trend in the evolution of the conditional efficiency scores over time, especially during the later years of the analysed period. Among contextual variables considered in our evaluation, the transparency index, the income equality index and the importance of taxable income derived from natural resources are the main factors affecting fiscal effort of countries.