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Fiscal Constraints, Collection Costs, And Trade Policies


  • Keiko Kubota


The last two decades witnessed trade liberalization in many developing countries. What caused this trend, and why have trade barriers been so ubiquitous when economic theory overwhelmingly supports free trade? This paper proposes that governments' revenue needs are the driving force. Governments may rely disproportionately on trade taxes because they are inexpensive to collect. Trade liberalization is an integral part of a tax reform: a tax base expansion is necessary to allow governments to reduce tariff rates. This hypothesis is supported by a panel data analysis of 27 developing countries. Copyright Blackwell Publishing Ltd 2005.

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  • Keiko Kubota, 2005. "Fiscal Constraints, Collection Costs, And Trade Policies," Economics and Politics, Wiley Blackwell, vol. 17, pages 129-150, March.
  • Handle: RePEc:bla:ecopol:v:17:y:2005:i::p:129-150

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    References listed on IDEAS

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    Cited by:

    1. Matschke, Xenia, 2008. "Costly revenue-raising and the case for favoring import-competing industries," Journal of International Economics, Elsevier, vol. 74(1), pages 143-157, January.
    2. Abel Escribà-Folch, 2009. "Do authoritarian institutions mobilize economic cooperation?," Constitutional Political Economy, Springer, vol. 20(1), pages 71-93, March.
    3. Kim, Sunghyun H. & Kose, M. Ayhan, 2014. "Welfare implications of trade liberalization and fiscal reform: A quantitative experiment," Journal of International Economics, Elsevier, vol. 92(1), pages 198-209.
    4. Richard Grabowski, 2010. "A comparison of Latin American and African economic development with an East Asian twist," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 24(2), pages 104-116, November.
    5. Buffie, Edward F. & Atolia, Manoj, 2012. "Trade, growth, and poverty in Zambia: Insights from a dynamic GE model," Journal of Policy Modeling, Elsevier, vol. 34(2), pages 211-229.
    6. Michael E. S. Hoffman, 2005. "Political and Public Finance Motives for Tariffs," International Trade 0510016, EconWPA.
    7. Epaphra, Manamba, 2014. "The Revenue Implications of Trade Liberalization in Tanzania," MPRA Paper 62330, University Library of Munich, Germany, revised 2014.
    8. Emran, M. Shahe & Stiglitz, Joseph E., 2005. "On selective indirect tax reform in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 599-623, April.
    9. Josh Ederington & Jenny Minier, 2008. "Reconsidering the empirical evidence on the Grossman-Helpman model of endogenous protection," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 501-516, May.
    10. Lee Robinson & Alice Nicole Sindzingre, 2012. "China’s Ambiguous Impacts on Commodity-Dependent Countries: the Example of Sub-Saharan Africa (with a Focus on Zambia)," EconomiX Working Papers 2012-39, University of Paris Nanterre, EconomiX.
    11. Bussmann, Margit, 2009. "The Effect of Trade Openness on Women's Welfare and Work Life," World Development, Elsevier, vol. 37(6), pages 1027-1038, June.
    12. ERBIL Can, "undated". "Trade Taxes Are Better ?!? Short Answer: No," EcoMod2003 330700048, EcoMod.

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