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Working Paper 349 - Revisiting the Relationship between Trade Liberalization and Taxation

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Abstract

This paper explores the dynamic effects of trade liberalization on tax revenue using a worldwide panel dataset. Results point to statistically significant negative effect of liberalization on (non- resource) tax revenues in the short term and no significant effect in the medium term. Liberalization also alter the tax structure tilting revenues toward indirect taxes away from direct ones. Economies which have implemented value added taxes prior to liberalization have mitigated its negative effects on tax revenues. The evidence is supportive of the complementarity role of state capacity to reap the benefits of liberalization.

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  • Rabah Arezki & Alou Adesse Dama & Grégoire Rota-Graziosi, 2021. "Working Paper 349 - Revisiting the Relationship between Trade Liberalization and Taxation," Working Paper Series 2475, African Development Bank.
    • Handle: RePEc:adb:adbwps:2475
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    References listed on IDEAS

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    4. Kym Anderson, 2021. "Food policy in a more volatile climate and trade environment," Departmental Working Papers 2021-25, The Australian National University, Arndt-Corden Department of Economics.

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    More about this item

    Keywords

    tax structure; openness; liberalization; natural resources JEL classification: H2; H87; F13;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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