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Why Do Poor democracies Collect a Lot of Tariff Revenue?

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  • Thomas Moutos

Abstract

Governments in developing countries typically collect a significantly higher proportion of their revenue in the form of trade taxes, than their developed country counterparts. This paper provides a political–economic explanation for this phenomenon. A model of trade in vertically differentiated products is used in order to determine the preferences of the households among different ways of raising government revenue. It is shown that the majority of households in poor countries will consume low‐quality, domestically produced varieties of differentiated products and would thus register a preference for the government to rely more on tariff rather than income tax revenue in order to finance its operations.

Suggested Citation

  • Thomas Moutos, 2001. "Why Do Poor democracies Collect a Lot of Tariff Revenue?," Economics and Politics, Wiley Blackwell, vol. 13(1), pages 95-112, March.
    • Handle: RePEc:bla:ecopol:v:13:y:2001:i:1:p:95-112
    DOI: 10.1111/1468-0343.00085
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    Cited by:

    1. Margarita Katsimi & Thomas Moutos, 2005. "Inequality and Relative Reliance on Tariffs: Theory and Evidence," CESifo Working Paper Series 1457, CESifo.
    2. Balamatsias, Pavlos, 2018. "Democracy and taxation," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-28.
    3. Kammas, Pantelis & Sarantides, Vassilis, 2020. "Democratisation and tax structure in the presence of home production: Evidence from the Kingdom of Greece," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 219-236.
    4. Jiunn‐Rong Chiou & Hong Hwang & Yan‐Shu Lin, 2005. "On the Equivalence of Tariffs and Quotas under a Revenue Constraint," Review of Development Economics, Wiley Blackwell, vol. 9(3), pages 343-358, August.
    5. Antonis Adam, 2009. "Fiscal Reliance on Tariff Revenues: In Search of a Political Economy Explanation?," Review of Development Economics, Wiley Blackwell, vol. 13(4), pages 610-625, November.
    6. Michael E. S. Hoffman, 2005. "Political and Public Finance Motives for Tariffs," International Trade 0510016, University Library of Munich, Germany.
    7. Margarita Katsimi & Thomas Moutos, 2010. "Inequality and the Relative Reliance on Tariffs," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 121-137, February.

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