Poor Democracies in a Conundrum? International Trade and Government Revenues in Developing Countries

Nita Rudra, Georgetown University
Friday, April 24, 2015 - 12:00pm to 1:30pm
Gowen 1A

Speaker's Bio: Nita Rudra is an Associate Professor of Government at Georgetown University. Her research interests include: the distributional impacts of globalization as they are mediated by politics and institutions; the influence of international organizations on social welfare in developing economies; the political foundations of different welfare regimes; and the causes and effects of democracy in globalizing developing nations. Her most critical works appear in the British Journal of Political Science, World Politics, Journal of Politics, American Journal of Political Science, Comparative Political Studies, International Organization and International Studies Quarterly. She has a book with Cambridge University Press entitled: Globalization and the Race to the Bottom in Developing Countries: Who Really Gets Hurt? , and co-edited a special issue of Comparative Political Studies on "Globalization and the Politics of Natural Resources" (with Nathan Jensen). She completed a one-year fellowship awarded by the Fulbright-Nehru Foundation at the Indian Institute of Management, Bangalore India in 2011. She has also been a recipient of the International Affairs Fellowship from the Council on Foreign Relations, which placed her at the Social Development Department of the World Bank for one year.

Paper Abstract: Has globalization affected the ability of economies to generate much needed government revenue?  Although scholars have hotly debated how this dynamic plays out in rich nations, we know surprisingly little about how globalization impacts public revenues in developing economies.  In this analysis, we focus on declining international trade tax revenue in poor nations and its potential to contribute to a fiscal revenue crisis. We hypothesize that regime type is a major determinant of revenue raising capacity after liberalization policies are adopted.  In conformity with the trade liberalization agenda, international trade taxes, once the primary form of government revenue generation in developing economies, have been cut; but policymakers in democracies are finding it more challenging than their authoritarian counterparts to replace the revenue loss via domestic tax reform.  Both macro and micro-level evidence support our hypothesis.  A key implication is that democracies may be facing severe fiscal challenges supplying much-needed public goods in the liberalizing environment.