Impact of Multilateral Trade Liberalization on Resource Revenue

Sena Gnangnon,Jean-François Brun

doi:10.3390/economies6040060

Abstract

This paper investigates the impact of multilateral trade liberalization on resource revenue, using an unbalanced panel dataset comprising 57 countries, including both developed and developing countries, over the period 1995–2015. By means of the two-step system Generalized Methods of Moments (GMM) estimator, the empirical analysis suggests that multilateral trade liberalization exerts a negative effect on resource revenue, probably at the benefit of non-resource revenue. However, this effect over the full sample hides a positive effect of multilateral trade liberalization on resource revenue in poorest countries, and a negative effect of multilateral trade liberalization on resource revenue in non-poorest countries of the sample. Additionally, the negative effect of multilateral trade liberalization on resource revenue over the full sample appears to be dependent on the degree of domestic trade liberalization. In fact, multilateral trade liberalization genuinely induces a reducing effect on resource revenue only if countries liberalize their domestic trade regime beyond a minimum level.

Highlights

The analysis has shown that, while multilateral trade liberalization exerts a negative effect on the resource revenue share over the full sample, the direction of this effect varies across the poorest and the non-poorest countries, as the effect is positive on resource revenue for Least-developed countries (LDCs), while, for NonLDCs, it is negative
Turning to the estimates presented in this table, two coefficients are of key interest to address the question of whether the effect of multilateral trade liberalization on resource revenue depends on the degree of domestic trade policy liberalization
This negative effect significant effect on resource revenue over the full sample. This negative effect reflects a positive effect of multilateral trade liberalization on resource revenue in the poorest countries (LDCs) and a negative effect of multilateral trade liberalization on resource revenue in the non-poorest countries of the full sample (NonLDCs)

Summary

Introduction

There is an abundant literature on the determinants of public revenue, in developing countries (e.g., Khattry and Rao 2002; Ebrill et al 1999; Agbeyegbe et al 2006; Brun et al 2007; Baunsgaard and Keen 2010; Brun et al 2011; Clist and Morrissey 2011; Thomas and Treviño2013; Crivelli and Gupta 2014; Brun et al 2015; Morrissey 2015; Clist 2016; Morrissey et al 2016; Yohou et al 2016; Von Haldenwang and Ivanyna 2017). There is an abundant literature on the determinants of public revenue, in developing countries Resource revenue includes tax revenue and non-tax revenue. Recently had some few studies such as Thomas and Treviño (2013); Crivelli and Gupta (2014); Brun et al. (2015); Omgba (2016) started focusing on the resource revenue component of total public revenue, by looking at the effect of resource revenue on non-resource revenue (but not the determinants of resource revenue). Non-resource revenue refers in the analysis to the part of total public revenue, which is not constituted by resource revenue

Results

Discussion

Conclusion