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Does Trade Liberalization Affect the Composition of Government Spending in Developing Nations?

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  • Michael O. Moore
  • Maurizio Zanardi

Abstract

Many skeptics of trade liberalization in the developing world argue that lowering trade taxes can cause significant fiscal pressures in countries particularly reliant on these taxes and result in a reallocation of resources away from important development goals. This research evaluates whether there is evidence that central governments systematically change the composition of spending priorities in the wake of lowered trade tax revenues as a share of total government revenues. We find very little evidence for this concern in a sample of 51 developing countries for the 1990 through 2005 period.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/56678/1/RePEc_eca_wpaper_2010_013.pdf
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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number 2010_013.

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Length: 57 p.
Date of creation: Mar 2010
Date of revision:
Publication status: Published by:
Handle: RePEc:eca:wpaper:2010_013

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Keywords: Government expenditure; tariff revenue; trade liberalization.;

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  1. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
  2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  3. M. Shahe Emran & Joseph E. Stiglitz, 2002. "On Selective Indirect Tax Reform in Developing Countries," International Trade 0210003, EconWPA.
  4. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
  5. Axel Dreher & Jan-Egbert Sturm & Heinrich W. Ursprung, 2006. "The impact of globalization on the composition of government expenditures: Evidence from panel data," KOF Working papers 06-141, KOF Swiss Economic Institute, ETH Zurich.
  6. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
  7. G√ľnther G. Schulze & Heinrich W. Ursprung, 1999. "Globalisation of the Economy and the Nation State," The World Economy, Wiley Blackwell, vol. 22(3), pages 295-352, 05.
  8. Khattry, Barsha & Mohan Rao, J., 2002. "Fiscal Faux Pas?: An Analysis of the Revenue Implications of Trade Liberalization," World Development, Elsevier, vol. 30(8), pages 1431-1444, August.
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Cited by:
  1. Kenji Fujiwara & Ryoma Kitamura, 2012. "A Tariff-Tax Reform under Oligopoly and Free Entry," Discussion Paper Series 88, School of Economics, Kwansei Gakuin University, revised Apr 2012.

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