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

24 Pages Posted: 11 Jun 2008

See all articles by Anthony J. Venables

Anthony J. Venables

University of Oxford; Centre for Economic Policy Research (CEPR)

Paul Collier

University of Oxford - Blavatnik School of Government

Date Written: February 1, 2008

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

JEL Classification: F1, F35, Q3

Suggested Citation

Venables, Anthony J. and Collier, Paul, Illusory Revenues: Tariffs in Resource-Rich and Aid-Rich Economies (February 1, 2008). CEPR Discussion Paper No. DP6729. Available at SSRN: https://ssrn.com/abstract=1141635

Anthony J. Venables

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Paul Collier (Contact Author)

University of Oxford - Blavatnik School of Government ( email )

10 Merton St
Oxford, Oxfordshire OX1 4JJ
United Kingdom

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