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Working Paper 349 - Revisiting the Relationship between Trade Liberalization and Taxation

Rabah Arezki (), Alou Adessé Dama () and Grégoire Rota-Graziosi ()
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Grégoire Rota-Graziosi: CERDI, Université Clermont Auvergne,

Working Paper Series from African Development Bank

Abstract: This paper explores the dynamic effects of trade liberalization on tax revenue using a worldwide panel dataset. Results point to statistically significant negative effect of liberalization on (non- resource) tax revenues in the short term and no significant effect in the medium term. Liberalization also alter the tax structure tilting revenues toward indirect taxes away from direct ones. Economies which have implemented value added taxes prior to liberalization have mitigated its negative effects on tax revenues. The evidence is supportive of the complementarity role of state capacity to reap the benefits of liberalization.

Keywords: tax structure; openness; liberalization; natural resources JEL classification: H2; H87; F13 (search for similar items in EconPapers)
Date: 2021-08-09
New Economics Papers: this item is included in nep-int, nep-pbe and nep-pub
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