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

Paul Collier and Anthony Venables ()

No 6729, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Aid; import tariffs; natural resources (search for similar items in EconPapers)
JEL-codes: F1 F35 Q3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2008-02
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