Does Trade Liberalization Affect the Composition of Government Spending in Developing Nations?

Many skeptics of trade liberalization in the developing world argue that lowering trade taxes can cause significant fiscal pressures in countries particularly reliant on these taxes and result in a reallocation of resources away from important development goals. This research evaluates whether there is evidence that central governments systematically change the composition of spending priorities in the wake of lowered trade tax revenues as a share of total government revenues. We find very little evidence for this concern in a sample of 51 developing countries for the 1990 through 2005 period.