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Does reduced trade tax revenue affect government spending patterns?

  • Michael O. Moore
  • Maurizio Zanardi
Article

Abstract

Many skeptics of trade liberalization in the developing world argue that lowering trade taxes can cause significant fiscal pressures in countries particularly reliant on these taxes and result in a reallocation of resources away from important development goals. This paper evaluates whether there is evidence that central governments systematically change the composition of spending priorities in the wake of lowered trade tax revenues as a share of total government revenues. We find no systematic evidence for this concern in a sample of 51 developing countries for the 1991 through 2005 period.

Keywords

Government expenditure Tariff revenue Trade liberalization 

JEL Classification

H7 F13 

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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Institute for International Economic Policy and Department of EconomicsGeorge Washington UniversityWashingtonUSA
  2. 2.ECARESUniversité Libre de BruxellesBrusselsBelgium

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