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Government Spending and Taxation in Democracies and Autocracies

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Author Info

  • Kjell Hausken
  • Christian W. Martin
  • Thomas Plümper

    ()

Abstract

The paper develops a theoretical rationale for a non-linear relationship between the level of democracy and government spending. A model is presented showing why and how political participation influences the spending behavior of opportunistic governments that can choose an optimal combination of rents and public goods to attract political support. If the level of democracy remains low, governments rationally prefer rents as an instrument to assure political support. With increasing democratic participation, however, rents become an increasingly expensive (per unit of political support) instrument while the provision of public goods becomes more and more efficient in ensuring the incumbent government's survival in power. As a consequence, an increase in democracy, which drives a country from a pure autocracy to a semi-participatory system, tends to reduce government spending, while an increase in political participation from a semi-participatory country to a full democracy tends to raise the size of the public sector.

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Bibliographic Info

Article provided by Springer in its journal Constitutional Political Economy.

Volume (Year): 15 (2004)
Issue (Month): 3 (09)
Pages: 239-259

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Handle: RePEc:kap:copoec:v:15:y:2004:i:3:p:239-259

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Web page: http://www.springerlink.com/link.asp?id=102866

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Cited by:
  1. Abel L. Costa Fernandes & Paulo R. Mota, 2012. "The Present Sovereign Debt Crisis Of The Euro Zone Peripheral Countries: A Case Of Non-Mature Democracies And Less Developed Economies," FEP Working Papers 458, Universidade do Porto, Faculdade de Economia do Porto.
  2. Abel Escribà-Folch, 2009. "Do authoritarian institutions mobilize economic cooperation?," Constitutional Political Economy, Springer, vol. 20(1), pages 71-93, March.
  3. Toke Aidt & Peter Jensen, 2013. "Democratization and the size of government: evidence from the long 19th century," Public Choice, Springer, vol. 157(3), pages 511-542, December.
  4. Mohammad Reza Farzanegan & Sajjad Faraji Dizaji, 2014. "Political Institutions and Government Spending Behavior in Iran," MAGKS Papers on Economics 201403, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  5. Plümper, Thomas & Neumayer, Eric, 2009. "Famine Mortality, Rational Political Inactivity, and International Food Aid," World Development, Elsevier, vol. 37(1), pages 50-61, January.
  6. Profeta, Paola & Puglisi, Riccardo & Scabrosetti, Simona, 2013. "Does democracy affect taxation and government spending? Evidence from developing countries," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 684-718.
  7. Alexander Libman, 2012. "Democracy and Growth: Is The Effect Non-Linear?," Economic Research Guardian, Weissberg Publishing, vol. 2(1), pages 99-120, May.
  8. Joan Costa-Font & Ana Rico, 2006. "Vertical Competition in the Spanish National Health System (NHS)," Public Choice, Springer, vol. 128(3), pages 477-498, September.
  9. Casper Hunnerup Dahl, 2014. "Parties and institutions: empirical evidence on veto players and the growth of government," Public Choice, Springer, vol. 159(3), pages 415-433, June.

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