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

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  • Venables, Anthony
  • Collier, Paul

Abstract

Where imports are financed predominantly by rents from resource extraction or aid, the revenue generated by tariffs is illusory. Revenue 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 demonstrate 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 countries in which tariff revenue is illusory should adopt more liberal trade regimes, we show that currently there is no such tendency.

Suggested Citation

  • Venables, Anthony & Collier, Paul, 2008. "Illusory Revenues: Tariffs in Resource-Rich and Aid-Rich Economies," CEPR Discussion Papers 6729, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:6729
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    References listed on IDEAS

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    1. 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 209-222, February.
    2. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, University Library of Munich, Germany.
    3. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    4. Pushan Dutt & Devashish Mitra, 2016. "Political Ideology And Endogenous Trade Policy: An Empirical Investigation," World Scientific Book Chapters, in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 5, pages 95-108, World Scientific Publishing Co. Pte. Ltd..
    5. Banerji, Arup & Ghanem, Hafez, 1997. "Does the Type of Political Regime Matter for Trade and Labor Market Policies?," The World Bank Economic Review, World Bank, vol. 11(1), pages 171-194, January.
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    Cited by:

    1. 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.
    2. Dora Benedek & Ernesto Crivelli & Sanjeev Gupta & Priscilla Muthoora, 2014. "Foreign Aid and Revenue: Still a Crowding-Out Effect?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(1), pages 67-96, March.
    3. Anthony Venables, 2009. "Economic Integration in Remote Resource-Rich Regions," OxCarre Working Papers 022, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    4. Pedro Concei ‹o & Ricardo Fuentes & Sebastian Levine, "undated". "Managing Natural Resources for Human Development in Low-Income Countries," UNDP Africa Policy Notes 2011-002, United Nations Development Programme, Regional Bureau for Africa.
    5. Paul Collier & Anthony Venables & Rick Van der Ploeg & Michael Spence, 2009. "Managing Resource Revenues in Developing," OxCarre Working Papers 015, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    6. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.

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    Keywords

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    JEL classification:

    • F1 - International Economics - - Trade
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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