Elections and the structure of taxation in developing countries
AbstractThis paper goes beyond traditional political budget cycles studies by considering the impact of the election calendar on the composition of tax revenue (direct taxes versus indirect taxes) rather than on the global level. We develop a theoretical model, based on Drazen and Eslava (2010) to predict how the taxation structure will be modif i ed during election years. Using a panel of 56 developing countries over 1980-2006, our study reveals clear patterns of electorally timed interventions. We found robust evidence that indirect taxes decreases are the preferred vehicle for incumbents in de veloping countries to increase their popularity just before elections. On average, they are falling of 2.6 percent in an election year while the direct taxes remain unchanged. These manipulations constitute reversals in the developing countries' tax reforms aim- ing at broaden tax bases and increase tax mobilization and point at the importance of both good fiscal institutions and fiscal discipline.
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Bibliographic InfoPaper provided by CERDI in its series Working Papers with number 201027.
Date of creation: 2010
Date of revision:
Political budget cycles; Tax structure; developing countries;
Other versions of this item:
- Helene Ehrhart, 2013. "Elections and the structure of taxation in developing countries," Public Choice, Springer, vol. 156(1), pages 195-211, July.
- Ehrhart, H., 2013. "Elections and the structure of taxation in developing countries," Working papers 419, Banque de France.
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-23 (All new papers)
- NEP-CDM-2010-10-23 (Collective Decision-Making)
- NEP-DEV-2010-10-23 (Development)
- NEP-PBE-2010-10-23 (Public Economics)
- NEP-POL-2010-10-23 (Positive Political Economics)
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- Christian Ebeke & Dilan Ã–lÃ§er, 2013. "Fiscal Policy over the Election Cycle in Low-Income Countries," IMF Working Papers 13/153, International Monetary Fund.
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