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Fiscal Constraints, Collection Costs, And Trade Policies

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  • Keiko Kubota

Abstract

The last two decades witnessed trade liberalization in many developing countries. What caused this trend, and why have trade barriers been so ubiquitous when economic theory overwhelmingly supports free trade? This paper proposes that governments' revenue needs are the driving force. Governments may rely disproportionately on trade taxes because they are inexpensive to collect. Trade liberalization is an integral part of a tax reform: a tax base expansion is necessary to allow governments to reduce tariff rates. This hypothesis is supported by a panel data analysis of 27 developing countries. Copyright Blackwell Publishing Ltd 2005.

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Article provided by Wiley Blackwell in its journal Economics & Politics.

Volume (Year): 17 (2005)
Issue (Month): (03)
Pages: 129-150

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Handle: RePEc:bla:ecopol:v:17:y:2005:i::p:129-150

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  1. Currie, Janet & Harrison, Ann E, 1997. "Sharing the Costs: The Impact of Trade Reform on Capital and Labor in Morocco," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S44-71, July.
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  16. Pritchett, Lant & Sethi, Geeta, 1994. "Tariff Rates, Tariff Revenue, and Tariff Reform: Some New Facts," World Bank Economic Review, World Bank Group, vol. 8(1), pages 1-16, January.
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Cited by:
  1. Buffie, Edward F. & Atolia, Manoj, 2012. "Trade, growth, and poverty in Zambia: Insights from a dynamic GE model," Journal of Policy Modeling, Elsevier, vol. 34(2), pages 211-229.
  2. Abel Escribà-Folch, 2009. "Do authoritarian institutions mobilize economic cooperation?," Constitutional Political Economy, Springer, vol. 20(1), pages 71-93, March.
  3. Emran, M. Shahe & Stiglitz, Joseph E., 2005. "On selective indirect tax reform in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 599-623, April.
  4. Bussmann, Margit, 2009. "The Effect of Trade Openness on Women's Welfare and Work Life," World Development, Elsevier, vol. 37(6), pages 1027-1038, June.
  5. Xenia Matschke, 2005. "Costly Revenue-Raising and the Case for Favoring Import-Competing Industries," CESifo Working Paper Series 1502, CESifo Group Munich.
  6. Lee Robinson & Alice Nicole Sindzingre, 2012. "China’s Ambiguous Impacts on Commodity-Dependent Countries: the Example of Sub-Saharan Africa (with a Focus on Zambia)," EconomiX Working Papers 2012-39, University of Paris West - Nanterre la Défense, EconomiX.
  7. Michael E. S. Hoffman, 2005. "Political and Public Finance Motives for Tariffs," International Trade 0510016, EconWPA.

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