Illusory Revenues: Tariffs in Resource-Rich and Aid-Rich Economies

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Illusory Revenues: Tariffs in Resource-Rich and Aid-Rich Economies

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Collier, Paul
Venables, Anthony J.

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Anthony J. Venables

Abstract

Where imports are financed predominantly by rents from resource extraction or aid, the revenue generated by tariffs is illusory. Revenue earned by the tariff is offset by a reduction in the real value of aid and resource rents. Revenue is however moved between accounts in the government budget, which, in the case of aid, may reduce the burden of donor conditionality. We demonstrate this proposition and its qualifications analytically and by simulating the effects of tariffs on revenue, real income, and export diversification for a range of cases. Whereas countries in which tariff revenue is illusory should adopt more liberal trade regimes, we show that currently there is no such tendency.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6729.

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Date of creation: Feb 2008
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Handle: RePEc:cpr:ceprdp:6729

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Find related papers by JEL classification:
F1 - International Economics - - Trade
F35 - International Economics - - International Finance - - - Foreign Aid
Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-04-12 (All new papers)
NEP-INT-2008-04-12 (International Trade)

References listed on IDEAS
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Pushan Dutt & Devashish Mitra, 2002. "Political Ideology and Endogenous Trade Policy: An Empirical Investigation," NBER Working Papers 9239, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Pushan Dutt & Devashish Mitra, 2005. "Political Ideology and Endogenous Trade Policy: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 59-72, October. [Downloadable!] (restricted)
Abe, Kenzo, 1992. "Tariff Reform in a Small Open Economy with Public Production," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 209-22, February. [Downloadable!] (restricted)

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