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

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  • Collier, Paul
  • Venables, Anthony J.

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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Keywords: Aid; import tariffs; natural resources;

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References

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  1. 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.
  2. Frederick Van der Ploeg, 2010. "Natural Resources: Curse or Blessing?," CESifo Working Paper Series 3125, CESifo Group Munich.
  3. 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, February.
  4. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade, EconWPA 0503003, EconWPA.
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Cited by:
  1. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
  2. Paul Collier & Frederick van der Ploeg & Michael Spence & Anthony J Venables, 2009. "Managing Resource Revenues in Developing Economies," OxCarre Working Papers, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford 015, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  3. Collier, Paul & Venables, Anthony J., 2011. "Illusory revenues: Import tariffs in resource-rich and aid-rich economies," Journal of Development Economics, Elsevier, vol. 94(2), pages 202-206, March.

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