Fiscal Reliance on Tariff Revenues: In Search of a Political Economy Explanation?

Antonis Adam

Review of Development Economics, 2009, vol. 13, issue 4, 610-625

Abstract: One “stylized fact” about trade policy is that trade taxes as a proportion of total tax revenue are inversely related to a country's economic development, as in countries with poor administrative capabilities trade taxes represent the easiest way for governments to raise revenue (Administrative Capabilities Hypothesis). In this paper we develop an alternative explanation based on political economy considerations: using data from 64 developing countries from 1982 until 1997 we find that the Administrative Capabilities Hypothesis must be complemented with a political economy explanation in order to be able to provide a better account of the relevant empirical evidence.

Date: 2009
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