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

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  • Paul Collier
  • Anthony J Venables

Abstract

Where imports are financed predominantly by rents from resource extraction or aid, the revenue generated by tariffs is illusory. Reveue 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 domonstrate 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 countires 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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Bibliographic Info

Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 004.

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Date of creation: 2008
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Handle: RePEc:oxf:oxcrwp:004

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Keywords: Aid; natural resources; import tariffs;

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References

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  1. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
  2. Pushan Dutt & Devashish Mitra, 2002. "Political Ideology and Endogenous Trade Policy: An Empirical Investigation," NBER Working Papers 9239, National Bureau of Economic Research, Inc.
  3. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, EconWPA.
  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 209-22, February.
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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 & Rick Van Der Ploeg & Michael Spence & Anthony J Venables, 2010. "Managing Resource Revenues in Developing Economies," IMF Staff Papers, Palgrave Macmillan, vol. 57(1), pages 84-118, April.
  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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