DOES TRADE LIBERALIZATION AFFECT TAX REVENUES AND GOVERNMENT SPENDING IN DEVELOPING NATIONS? A PANEL DATA ANALYSIS

Abstract

Purpose: Developing nations are facing the twin deficit phenomena. The fiscal deficit creates many challenges for these countries. These countries aim to enhance their tax base and government size. In this milieu, this study examines the nexus among trade liberalization, tax revenues and government spending for developing countries from 1996 to 2019.

Design/Methodology/Approach: The study has applied the fixed-effect method after applying the Hausman test.

Findings: The findings exhibit a positive impact of trade liberalization on tax revenues and government expenditures.

Implications/Originality/Value: It is suggested that the policymakers must devise trade openness policies to raise tax revenues and government expenditures in these countries