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Import Liberalisation and Revenue Replacement: Impacts in a Small Asian Developing Economy


  • Sanjaya Acharya

    () (Tribhuvan University, Kathmandu.)


Using a multi-sectoral computable general equilibrium model, we assess the macroeconomic and welfare impacts of import liberalisation along with revenue replacement from domestic taxes in the small developing economy of Nepal. We conclude that impact differs across activities. For example, agricultural and industrial activities expand whereas service activities contract. Overall, GDP grows marginally along with insignificant changes in other macroeconomic features. However, as an impact of this policy, incomes of the richest household group grow faster than that of poorer households. Furthermore, the replacement by the domestic indirect tax lowers the GDP growth rate and makes the distribution pattern more unfavourable to the poor; whereas the replacement by the income tax and non-agricultural commodity tax causes GDP to grow at a relatively higher rate and does not negatively affect the distribution pattern except for one of the richer household groups. The welfare gains to households in all the scenarios are positive but are very minimal.A l’aide d’un modèle d’équilibre général calculable multi-sectoriel, nous évaluons les impacts macroéconomiques et sociaux de la libéralisation des importations dans une petite économie en voie de développement, celle du Népal. Nous concluons que les impacts diffèrent en fonction des secteurs d’activités; les activités industrielles et agricoles s’étendent tandis que les activités de services se contractent. Dans l’ensemble, on observe une augmentation marginale du PIB ainsi que d’autres évolutions moins significatives au niveau macroéconomique. Cependant, les revenus des ménages les plus riches augmentent plus rapidement que ceux des ménages les plus pauvres. Par ailleurs, la compensation des pertes de recettes par les seules taxes indirectes intérieures ralentit la croissance du PIB et renforce le déséquilibre dans la distribution des revenus, au dépend des plus pauvres. Un remplacement des recettes par un impôt sur le revenu et par une taxe sur les produits non agricoles permettrait une augmentation relativement plus rapide du PIB sans défavoriser les classes moins privilégiées, mais les effets de ce cas de figure sur le bien-être social des ménages resteraient limités.

Suggested Citation

  • Sanjaya Acharya, 2010. "Import Liberalisation and Revenue Replacement: Impacts in a Small Asian Developing Economy," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 22(3), pages 417-442, July.
  • Handle: RePEc:pal:eurjdr:v:22:y:2010:i:3:p:417-442

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    References listed on IDEAS

    1. Susanna Kinnman & Magnus Lodefalk, 2007. "What is at Stake in the Doha Round?," The World Economy, Wiley Blackwell, vol. 30(8), pages 1305-1325, August.
    2. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
    3. Antoine Bouët & Simon Mevel & David Orden, 2007. "More or Less Ambition in the Doha Round: Winners and Losers from Trade Liberalisation with a Development Perspective," The World Economy, Wiley Blackwell, vol. 30(8), pages 1253-1280, August.
    4. Shafaeddin, Mehdi, 2006. "Is The Industrial Policy Relevant In The 21st Century?," MPRA Paper 6643, University Library of Munich, Germany.
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    Cited by:

    1. Surya Bahadur Thapa, 2012. "Nepal's Trade Flows: Evidence from Gravity Model," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 24(1), pages 16-27, April.
    2. repec:nrb:journl:v:24:y:2012:i:1:p:2 is not listed on IDEAS
    3. Obeng, Camara Kwasi, 2014. "Impact of import liberalisation on poverty: a dynamic computable general equilibrium and microsimulation analysis for Ghana," MPRA Paper 58182, University Library of Munich, Germany.

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