Assessing the relationship between democracy and domestic taxes in developing countries
AbstractTo 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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Date of creation: 07 Jan 2011
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Tax Revenues; democracy; developing countries;
Other versions of this item:
- Helene Ehrhart, 2012. "Assessing the relationship between democracy and domestic taxes in developing countries," Economics Bulletin, AccessEcon, vol. 32(1), pages 551-566.
- Helene Ehrhart, 2009. "Assessing the relationship between democracy and domestic taxes in developing countries," Working Papers 200930, CERDI.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
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