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Does Trade Liberalization Affect the Composition of Government Spending in Developing Nations?

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  • Michael O. Moore
  • Maurizio Zanardi

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 research 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 very little evidence for this concern in a sample of 51 developing countries for the 1990 through 2005 period.

Suggested Citation

  • Michael O. Moore & Maurizio Zanardi, 2010. "Does Trade Liberalization Affect the Composition of Government Spending in Developing Nations?," Working Papers ECARES 2010_013, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2010_013
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    References listed on IDEAS

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    1. 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.
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    7. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
    8. Khattry, Barsha & Mohan Rao, J., 2002. "Fiscal Faux Pas?: An Analysis of the Revenue Implications of Trade Liberalization," World Development, Elsevier, vol. 30(8), pages 1431-1444, August.
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    Cited by:

    1. Kenji Fujiwara & Ryoma Kitamura, 2012. "A Tariff-Tax Reform under Oligopoly and Free Entry," Discussion Paper Series 88, School of Economics, Kwansei Gakuin University, revised Apr 2012.

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    More about this item

    Keywords

    Government expenditure; tariff revenue; trade liberalization.;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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