Amèvi Kouwoaye on trade tax reforms and poverty in developing countries: why some countries benefit and others lose out

On 21 November Amèvi Kouwoaye, PhD Candidate, University of Laval, will present his research.

Abstract - Trade tax reforms and poverty in developing countries: why some countries benefit and others lose out?

This paper studies the relationship between trade tax reforms and poverty in developing countries and investigates whether the role of public good provision matters in this relationship. We contribute theoretically by developing rural-urban tax-poverty model. In the empirical application, we model the trade tax reforms-poverty nexus as heterogeneous across countries with cross-sectionally dependent errors.

Using a sample of 91 developing countries over 1980-2016 period, we first find that an increase in trade taxes reduces poverty on average, but this effect varies largely across countries. An increase in trade taxes increases poverty in the countries that are net exporters of agricultural products while it decreases poverty in net importers countries. Second, we find that a shift from taxes on international trade towards domestic taxes under revenue-neutrality reduces poverty in the countries that have consolidated on average over time their comparative advantage in agriculture while it increases poverty in countries that moved from nets exporters to net importers of agricultural products.

Finally, investigating the role of the public good in the trade tax reforms-poverty nexus, we show that the public good doesn't play a significant role in the relationship between trade tax reforms and poverty under revenue neutrality.

To register your attendance email Ruby Richardson

WIDER Seminar Series

The WIDER Seminar Series showcases recent and ongoing work on key topics in development economics. The weekly sessions held in Helsinki are open to local and visiting researchers, students, policy makers, and others interested in development topics. Click here to learn more.