Gallagher Co-authors Research Paper for Global Policy
Kevin Gallagher, Professor of Global Development Policy at the Frederick S. Pardee School of Global Studies and Director of the Global Development Policy (GDP) Center, along with colleagues Devaka Dutt and Rachel D. Thrasher, is the co-author of a new research paper published in the Journal Global Policy (2020) titled, “Trade Liberalization and Fiscal Stability in Developing Countries: What Does the Evidence Tell US?”
The paper evaluates the evidence as regards the extent to which trade liberalization has led to a decline in tariff revenue, total tax revenue, government expenditure, and government debt. It concludes that “the majority of the evidence finds that low income countries lose trade tax revenue and are unable to recoup much of that lost revenue.”
The abstract of the paper adds:
Conventional theory generally predicts that when tariff losses do occur, they may be recouped through better forms of taxation – though a more sophisticated body of theory suggests otherwise. The empirical evidence is also mixed. Theory driven ex‐ante models of trade liberalization assume that trade agreements are revenue neutral. Ex‐post studies suggest that theory may hold in advanced and upper middle‐income economies. However, the consequences for lower income countries are a matter for concern… At a time when fresh bilateral trade and investment treaties are being negotiated and WTO reform is on the global policy agenda, this paper highlights the need to design a treaty regime that enhances the ability of poorer nations to mobilize domestic resources without jeopardizing fiscal and financial stability.
Kevin Gallagher is a professor of global development policy at Boston University’s Frederick S. Pardee School of Global Studies, where he directs the Global Development Policy Center. He is author or co-author of six books, including most recently, The China Triangle: Latin America’s China Boom and the Fate of the Washington Consensus. Read more here.