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Relationship between rule of law and tax revenues: dynamic panel data analysis

Author

Listed:
  • Tugay Gunel

    (Cukurova University, Faculty of Economics and Administrative Sciences, Department of Public Finance, Adana, Turkey)

  • Irem Didinmez

    (Hacettepe University, Faculty of Economics and Administrative Sciences, Department of Public Finance, Ankara, Turkey)

Abstract

Tax revenue has been declining in most countries recently. Therefore, to better understand the reasons behind this, some studies focus on supply factors, while few studies focus on demand factors. In this context, this study aims to analyse the impact of rule of law on tax revenues in 59 countries by using the panel dana method over the period 2002-2018 considering the level of economic development. This study is different from previous studies in several respects. Firstly, it uses a different and more comprehensive index to measure rule of law. Secondly, we focus on the economic level of countries, which is a crucial factor for measuring efficiency of the rule of law. The results show that the effect of rule of law on tax revenues varies based on the level of economic development of the countries.

Suggested Citation

  • Tugay Gunel & Irem Didinmez, 2022. "Relationship between rule of law and tax revenues: dynamic panel data analysis," Public Sector Economics, Institute of Public Finance, vol. 46(3), pages 403-419.
    • Handle: RePEc:ipf:psejou:v:46:y:2022:i:3:p:403-419
    DOI: 10.3326/pse.46.3.4
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    More about this item

    Keywords

    rule of law; tax revenues; economic development; dynamic panel data analysis;
    All these keywords.

    JEL classification:

    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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