Astri Warih Anjarwi
This study investigates how fiscal structures and socio-economic conditions influence global export performance in lower-middle-income countries. Drawing on Optimal Taxation Theory, it examines the direct effects of taxes on goods and services (proxying VAT dependence) and poverty on a country’s share of world exports, while also assessing the mediating role of export capacity. The analysis employs Structural Equation Modeling (SEM) on cross-country panel data from 2008 to 2023, covering 36 lower-middle-income economies. Results reveal that both VAT dependence and poverty exert significant negative effects on global export performance. Furthermore, exports of goods and services significantly mediate these relationships, highlighting the importance of trade capacity as a transmission channel. The findings suggest that excessive reliance on consumption taxes and persistent poverty distort productive efficiency and undermine export competitiveness–core concerns addressed by Optimal Taxation Theory. This study contributes to the literature by integrating fiscal and social determinants of trade performance into a unified empirical framework, offering policy-relevant insights for enhancing external competitiveness in emerging economies. © 2025 Informa UK Limited, trading as Taylor & Francis Group.
Faculty of Administrative Sciences, Brawijaya University, Malang, Indonesia
