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Why Kill The Golden Goose? A Political-Economy Model Of Export Taxation

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  • Margaret McMillan

Abstract

Why do governments tax exports at rates that are ultimately self-defeating? An answer may lie in the time-inconsistent nature of a low-tax policy. Using a dynamic model of export taxation, I show that the sustainability of a low-tax policy depends on three variables: the ratio of sunk costs to total costs, how heavily future export revenue is discounted, and expected future export earnings. Using data on taxation, leadership duration, and profitability, I test this theory for 32 countries and six crops from Sub-Saharan Africa. These three variables are statistically and economically relevant predictors of tax regime. 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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  • Margaret McMillan, 2001. "Why Kill The Golden Goose? A Political-Economy Model Of Export Taxation," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 170-184, February.
    • Handle: RePEc:tpr:restat:v:83:y:2001:i:1:p:170-184
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    Cited by:

    1. Gourdon, Julien & Monjon, Stéphanie & Poncet, Sandra, 2016. "Trade policy and industrial policy in China: What motivates public authorities to apply restrictions on exports?," China Economic Review, Elsevier, vol. 40(C), pages 105-120.
    2. Kym Anderson & Gordon Rausser & Johan Swinnen, 2013. "Political Economy of Public Policies: Insights from Distortions to Agricultural and Food Markets," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 423-477, June.
    3. Foellmi, Reto & Oechslin, Manuel, 2010. "Market imperfections, wealth inequality, and the distribution of trade gains," Journal of International Economics, Elsevier, vol. 81(1), pages 15-25, May.
    4. Chih Ming Tan, 2010. "No one true path: uncovering the interplay between geography, institutions, and fractionalization in economic development," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1100-1127, November/.
    5. Kazianga, Harounan & Masters, William A. & McMillan, Margaret S., 2014. "Disease control, demographic change and institutional development in Africa," Journal of Development Economics, Elsevier, vol. 110(C), pages 313-326.
    6. repec:nbr:nberch:13373 is not listed on IDEAS
    7. Margaret S. McMillan & William A. Masters, 2000. "Africa's Growth Trap: A Political-Economy Model of Taxation, R&D and Investment," CID Working Papers 50A, Center for International Development at Harvard University.
    8. Schulz, Nicolai, 2020. "The politics of export restrictions: A panel data analysis of African commodity processing industries," World Development, Elsevier, vol. 130(C).
    9. Jaime de Melo, 2012. "Trade in a 'Green Growth' Development Strategy Global Scale Issues and Challenges," Working Papers 2012.47, Fondazione Eni Enrico Mattei.
    10. Margaret S. McMillan & William A. Masters & Harounan Kazianga, 2011. "Rural Demography, Public Services and Land Rights in Africa: A Village-Level Analysis in Burkina Faso," NBER Working Papers 17718, National Bureau of Economic Research, Inc.
    11. de Melo, Jaime & Cadot, Olivier & Dutoit, Laure, 2006. "The Elimination of Madagascar's Vanilla Marketing Board, Ten Years On," CEPR Discussion Papers 5548, C.E.P.R. Discussion Papers.
    12. Jaime DE MELO & Marcelo OLARREAGA, 2017. "Trade Related Institutions and Development," Working Papers P199, FERDI.
    13. Olga Solleder, 2013. "Panel Export Taxes (PET) Dataset: New Data on Export Tax Rates," IHEID Working Papers 07-2013, Economics Section, The Graduate Institute of International Studies.
    14. Matthew DiGiuseppe & Patrick E. Shea, 2016. "Borrowed Time: Sovereign Finance, Regime Type, and Leader Survival," Economics and Politics, Wiley Blackwell, vol. 28(3), pages 342-367, November.
    15. Margaret S. McMillan & William A. Masters & Harounan Kazianga, 2014. "Demographic Pressure and Institutional Change: Village-Level Response to Rural Population Growth in Burkina Faso," NBER Chapters, in: African Successes, Volume I: Government and Institutions, pages 103-143, National Bureau of Economic Research, Inc.
    16. Kym Anderson, 2016. "Agricultural Trade, Policy Reforms, and Global Food Security," Palgrave Studies in Agricultural Economics and Food Policy, Palgrave Macmillan, number 978-1-137-46925-0, June.
    17. Souleymane Soumahoro, 2014. "Export Taxes and Consumption: A �Natural Experiment� from C�te d'Ivoire," HiCN Working Papers 182, Households in Conflict Network.
    18. Richard M. Auty, 2014. "The resource curse and sustainable development," Chapters, in: Giles Atkinson & Simon Dietz & Eric Neumayer & Matthew Agarwala (ed.), Handbook of Sustainable Development, chapter 17, pages 267-278, Edward Elgar Publishing.
    19. Floribert Ngaruko, 2003. "Agricultural Export Performance in Africa: Elements of comparison with Asia," Working Papers 03-09, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
    20. Gawande, Kishore & Hoekman, Bernard, 2009. "Why Governments Tax or Subsidize Trade: Evidence from Agriculture," Agricultural Distortions Working Paper Series 50300, World Bank.
    21. Xinshen Diao & Margaret McMillan & Samuel Wangwe, 2018. "Agricultural Labour Productivity and Industrialisation: Lessons for Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 27(1), pages 28-65.

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