Trade Liberalization, Exchange Rate Changes, and Tax Revenue in Sub-Saharan Africa

By T. D. Agbeyegbe, J. Stotsky, Asegedech WoldeMariam. Social Science Research Network, 2004

279 citations recorded by the source corpus.

Empirical evidence on the relationship between trade liberalization, exchange rates, and tax revenue is mixed. This paper examines these linkages anew. Using a panel of 22 countries in Sub-Saharan Africa, over 1980–1996, we perform Generalized Method of Moment regressions to test this relationship. We find evidence that the relationship between trade liberalization and tax revenue is sensitive to the measure used to proxy trade liberalization, but that, in general, trade liberalization is not strongly linked to aggregate tax revenue or its components—though with one measure, it is linked to higher income tax revenue. Currency appreciation and higher inflation show some linkage to lower tax revenues or its components. These results show some partial consistency with previous findings, and support the notion that trade liberalization accompanied by appropriate macroeconomic policies can be undertaken in a way that preserves overall revenue yield.

Subfields: Economics and Econometrics, Information Systems

View Paper: https://www.semanticscholar.org/paper/0c1b4f6ffd3d112a8e91cadc373f1e87ecda8262

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Information Systems

Citations in the corpus

Determining Countries' Tax Effort (2010, result): “9 With regard to inflation, the significance of this variable is consistent with findings of Agbeyegbe, Stotsky, and WoldeMariam (2004) and Davoodi and Grigorian (2007).”
Tax Revenue and (or?) Trade Liberalization (2005, background): “Abgeyegbe, Stotsky, and WoldeMariam (2004) examine how trade liberalization has affected tax revenues (both in total and in the major subcategories) for a panel of countries in Sub-Saharan Africa.”
On Tax Efforts and Colonial Heritage in Africa (2010, background): “Aid might also weaken some tax handles by, for example, impairing export performance through adverse movements in the real exchange rate (so-called ‘Dutch Disease effects’) (Elbadawi, 1999; Agbeyegbe et al., 2004).”