Working Paper: NBER ID: w11933
Authors: Joshua Aizenman; Yothin Jinjarak
Abstract: This paper evaluates the impact of globalization on the tax bases of countries at varying stages of development. We see globalization as a process that induces countries to embrace greater trade and financial integration. This in turn should shift their tax revenue from "easy to collect" taxes (tariffs and seigniorage) towards "hard to collect" taxes (value added and income taxes). We find that trade and financial openness have a positive association with the "hard to collect" taxes, and a negative association with the "easy to collect" taxes.
Keywords: Globalization; Tax Revenue; Developing Countries; Trade Openness; Financial Integration
JEL Codes: F15; H21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| better institutional quality (O17) | reliance on easy-to-collect taxes (H26) |
| urbanization (R11) | VAT collection (H26) |
| trade and financial openness (F30) | hard-to-collect tax revenues (H26) |
| trade and financial openness (F30) | easy-to-collect tax revenues (H26) |
| trade openness (F43) | income taxes (H24) |