Economic Implications of Taxing Agricultural exports: The Case of Pakistan's Basmati Rice
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The impact of an ad valorem export tax on Pakistan's Basmati rice trade is analysed in
a partial equilibrium framework. Results suggest that producers of Basmati rice lost a considerable
amount of their producer surplus while consumers gained in terms of their consumer surplus. The
national treasury received tax revenues as well as some positive increases in foreign exchange earnings.
The nation as a whole thus gained. However, the tax pushes up international prices, which may encourage
other producers to increase their production and compete for their shares. A gradual decrease in the level
of the export tax and an increase in producer price may take care of the adverse effects of the export tax.