The Impact of Trade Liberalization on Government Revenues in Egypt

Author(s): Omneia Helmy
Publication Number: ECES-WP101-A

This paper uses a partial equilibrium model to estimate the revenue impact of the 2004 trade liberalization effort in Egypt. It further simulates the likely impact on revenue if the government were to pursue further trade liberalization. The analysis takes into account both the change in the tariff structure as well as the price elasticity of import demand.

The study concludes that the recent trade liberalization is likely to reduce government revenue in the short run, albeit modestly due to the expected increase in imports in response to lower prices. As for the simulation results, the analysis indicates that additional tariff reductions along the lines of more liberal developing countries can be designed in such a way
as to make it revenue-enhancing.

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