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Illusory Revenues: Import tariffs in Resource-Rich and Aid-Rich Economies

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  • Anthony Venables
  • Paul Collier

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 for a simple central case and show that the result is not overturned by generalisations around this case. We argue that trade policy formulation in such economies should recognise the illusory nature of tariff revenues.

Suggested Citation

  • Anthony Venables & Paul Collier, 2008. "Illusory Revenues: Import tariffs in Resource-Rich and Aid-Rich Economies," OxCarre Working Papers 004, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:004
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    References listed on IDEAS

    as
    1. 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.
    2. World Bank, 2007. "World Development Indicators 2007," World Bank Publications - Books, The World Bank Group, number 8150, December.
    3. Venables, Anthony & Collier, Paul, 2008. "Illusory Revenues: Tariffs in Resource-Rich and Aid-Rich Economies," CEPR Discussion Papers 6729, C.E.P.R. Discussion Papers.
    4. 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 209-222, February.
    5. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
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    Cited by:

    1. Rick Van der Ploeg & Fidel Perez-Sebastian & Ohad Raveh, 2019. "Oil Discoveries and Protectionism," Economics Series Working Papers 895, University of Oxford, Department of Economics.
    2. Breisinger, Clemens & Diao, Xinshen & Wiebelt, Manfred, 2012. "Can oil-led growth and structural change go hand in hand in Ghana? A multi-sector intertemporal general equilibrium assessment," Kiel Working Papers 1784, Kiel Institute for the World Economy (IfW Kiel).
    3. Derek Kellenberg & Arik Levinson, 2019. "Misreporting trade: Tariff evasion, corruption, and auditing standards," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 106-129, February.
    4. Michele Ruta & Anthony J. Venables, 2012. "International Trade in Natural Resources: Practice and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 331-352, August.
    5. Perez-Sebastian, Fidel & Raveh, Ohad & van der Ploeg, Frederick, 2021. "Oil discoveries and protectionism: Role of news effects," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    6. Chi-Chur Chao & Eden Siu Hung Yu, 2014. "Minimum Wage and Capital Taxes," Review of Development Economics, Wiley Blackwell, vol. 18(2), pages 195-202, May.
    7. Carter Patrick, 2013. "Does Foreign Aid Displace Domestic Taxation?," Journal of Globalization and Development, De Gruyter, vol. 4(1), pages 1-47, August.
    8. 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.
    9. Dora Benedek & Ernesto Crivelli & Sanjeev Gupta & Priscilla Muthoora, 2014. "Foreign Aid and Revenue: Still a Crowding-Out Effect?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(1), pages 67-96, March.
    10. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    11. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
    12. Breisinger, Clemens & Diao, Xinshen & Wiebelt, Manfred, 2014. "Can oil-led growth and structural change go hand in hand in Ghana?," Journal of Policy Modeling, Elsevier, vol. 36(3), pages 507-523.

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    More about this item

    Keywords

    Aid; natural resources; import tariffs;
    All these keywords.

    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

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