Multilateral Trade Liberalization and Government Revenue

Abstract

This paper contributes to the impact of domestic trade liberalization on government revenue by examining whether multilateral trade policy liberalization is important for government revenue. Our empirical analysis uses a panel dataset covering 169 countries from 1995 to 2013 to provide evidence that multilateral trade policy liberalization does have a positive impact on government revenue. However, this impact appears to be dependent upon both countries’ level of development and their level of domestic trade policy liberalization. This finding highlights the importance for members of the World Trade Organization to promote multilateral trade liberalization. Further, restrictive domestic trade policies, which could undermine multilateralization efforts, will ultimately weaken the positive impact of multilateral trade liberalization on government revenues.