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Assessing the relationship between democracy and domestic taxes in developing countries

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  • Hélène EHRHART

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

Abstract

To what extent differences across developing countries in their domestic tax mobilization can be explained, in addition to the traditional determinants, by political economy factors and particularly by the political regime? Using a panel of 66 developing countries over the period 1990-2005, this paper provides econometric evidence that democracy matters for achieving higher domestic tax revenues which are much needed to finance public goods. It is especially the level of constraints on the executive which is of importance to counter the government's propensity to cave in for special interests and to be insufficiently welfare minded. We found that high levels of democracy are specifically needed in natural resource rich countries to make natural resource rents contribute to higher domestic tax revenues and no longer be an impediment to a sustained tax system.

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File URL: http://publi.cerdi.org/ed/2009/2009.30.pdf
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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 200930.

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Length: 19
Date of creation: 2009
Date of revision:
Handle: RePEc:cdi:wpaper:1118

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Keywords: Tax Revenues; democracy; developing countries;

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  1. Robinson, James A. & Torvik, Ragnar & Verdier, Thierry, 2006. "Political foundations of the resource curse," Journal of Development Economics, Elsevier, Elsevier, vol. 79(2), pages 447-468, April.
  2. Adam, Antonis & Delis, Manthos D & Kammas, Pantelis, 2009. "Are democratic governments more efficient?," MPRA Paper 15843, University Library of Munich, Germany.
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  7. Bird, Richard M. & Martinez-Vazquez, Jorge & Torgler, Benno, 2008. "Tax Effort in Developing Countries and High Income Countries: The Impact of Corruption, Voice and Accountability," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, Queensland University of Technology (QUT), School of Economics and Finance, vol. 38(1), pages 55-71, March.
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  9. Cesar Calderon & Alberto Chong, 2006. "Do Democracies Breed Rent-seeking Behavior?," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 9(4), pages 247-260.
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  12. Paul Clist & Oliver Morrissey, 2011. "Aid and tax revenue: Signs of a positive effect since the 1980s," Journal of International Development, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 23(2), pages 165-180, March.
  13. Bornhorst, Fabian & Gupta, Sanjeev & Thornton, John, 2009. "Natural resource endowments and the domestic revenue effort," European Journal of Political Economy, Elsevier, Elsevier, vol. 25(4), pages 439-446, December.
  14. Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubaşoglu, 2002. ""Protection For Sale" In A Developing Country: Democracy Vs. Dictatorship," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 497-508, August.
  15. Gérard CHAMBAS & Jean-François BRUN & Martial LAURENT, 2007. "Economie politique de la réforme de transition fiscale : le cas du Maroc," Working Papers, CERDI 200717, CERDI.
  16. Michael Keen & Mario Mansour, 2010. "Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation I - Trade Reform," Development Policy Review, Overseas Development Institute, Overseas Development Institute, vol. 28(5), pages 553-571, 09.
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Cited by:
  1. Clarisse Nguedam Ntouko, 2013. "Regulatory Framework and Private Investment: Empirical Evidence for Developing Countries," Economics Bulletin, AccessEcon, vol. 33(1), pages 494-510.
  2. Lucotte, Yannick, 2010. "Adoption of inflation targeting and tax revenue performance in emerging market economies: An empirical investigation," MPRA Paper 23871, University Library of Munich, Germany.
  3. Ivanyna, Maksym & von Haldenwang, Christian, 2012. "A comparative view on the tax performance of developing countries: Regional patterns, non-tax revenue and governance," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, Kiel Institute for the World Economy, vol. 6(32), pages 1-44.
  4. Yannick Lucotte, 2010. "The choice of adopting inflation targeting in emerging economies: Do domestic institutions matter?," Post-Print, HAL hal-00539713, HAL.

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