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Why Kill The Golden Goose? A Political-Economy Model Of Export Taxation

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  • Margaret McMillan

Abstract

Why do governments tax exports at rates that are ultimately self-defeating? An answer may lie in the time-inconsistent nature of a low-tax policy. Using a dynamic model of export taxation, I show that the sustainability of a low-tax policy depends on three variables: the ratio of sunk costs to total costs, how heavily future export revenue is discounted, and expected future export earnings. Using data on taxation, leadership duration, and profitability, I test this theory for 32 countries and six crops from Sub-Saharan Africa. These three variables are statistically and economically relevant predictors of tax regime. 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Margaret McMillan, 2001. "Why Kill The Golden Goose? A Political-Economy Model Of Export Taxation," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 170-184, February.
  • Handle: RePEc:tpr:restat:v:83:y:2001:i:1:p:170-184
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    Citations

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    Cited by:

    1. Gourdon, Julien & Monjon, Stéphanie & Poncet, Sandra, 2016. "Trade policy and industrial policy in China: What motivates public authorities to apply restrictions on exports?," China Economic Review, Elsevier, vol. 40(C), pages 105-120.
    2. Kazianga, Harounan & Masters, William A. & McMillan, Margaret S., 2014. "Disease control, demographic change and institutional development in Africa," Journal of Development Economics, Elsevier, vol. 110(C), pages 313-326.
    3. Kym Anderson & Gordon Rausser & Johan Swinnen, 2013. "Political Economy of Public Policies: Insights from Distortions to Agricultural and Food Markets," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 423-477, June.
    4. Olga Solleder, 2013. "Panel Export Taxes (PET) Dataset: New Data on Export Tax Rates," IHEID Working Papers 07-2013, Economics Section, The Graduate Institute of International Studies.
    5. Matthew DiGiuseppe & Patrick E. Shea, 2016. "Borrowed Time: Sovereign Finance, Regime Type, and Leader Survival," Economics and Politics, Wiley Blackwell, vol. 28(3), pages 342-367, November.
    6. Jaime DE MELO & Marcelo OLARREAGA, 2017. "Trade Related Institutions and Development," Working Papers P199, FERDI.
    7. Foellmi, Reto & Oechslin, Manuel, 2010. "Market imperfections, wealth inequality, and the distribution of trade gains," Journal of International Economics, Elsevier, vol. 81(1), pages 15-25, May.
    8. Margaret S. McMillan & William A. Masters & Harounan Kazianga, 2014. "Demographic Pressure and Institutional Change: Village-Level Response to Rural Population Growth in Burkina Faso," NBER Chapters,in: African Successes, Volume I: Government and Institutions, pages 103-143 National Bureau of Economic Research, Inc.
    9. Souleymane Soumahoro, 2014. "Export Taxes and Consumption: A ‘Natural Experiment’ from Côte d'Ivoire," HiCN Working Papers 182, Households in Conflict Network.
    10. Richard M. Auty, 2014. "The resource curse and sustainable development," Chapters,in: Handbook of Sustainable Development, chapter 17, pages 267-278 Edward Elgar Publishing.
    11. Chih Ming Tan, 2010. "No one true path: uncovering the interplay between geography, institutions, and fractionalization in economic development," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1100-1127, November/.
    12. repec:nbr:nberch:13373 is not listed on IDEAS
    13. Margaret S. McMillan & William A. Masters, 2000. "Africa's Growth Trap: A Political-Economy Model of Taxation, R&D and Investment," CID Working Papers 50A, Center for International Development at Harvard University.
    14. Floribert Ngaruko, 2003. "Agricultural Export Performance in Africa: Elements of comparison with Asia," Working Papers 03-09, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
    15. repec:oup:jafrec:v:27:y:2018:i:1:p:28-65. is not listed on IDEAS
    16. Cadot, Olivier & Dutoit, Laure & de Melo, Jaime, 2006. "The elimination of Madagascar's Vanilla Marketing Board, ten years on," Policy Research Working Paper Series 3979, The World Bank.

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