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Taxation and democratization

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  • Baskaran, Thushyanthan

Abstract

Anecdotal evidence from pre-modern Europe and North America suggests that rulers are forced to become more democratic once they impose a significant fiscal burden on their citizens. One difficulty in testing this taxation causes democratization hypothesis empirically is the endogeneity of public revenues. I use introductions of value added taxes and autonomous revenue authorities as sources of quasi-exogenous variation to identify the causal effect of the fiscal burden borne by citizens on democracy. The instrumental variables regressions with a panel of 122 countries over the period 1981-2008 suggest that revenues had on average a mild positive effect on democracy. --

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Bibliographic Info

Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 164.

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Date of creation: 2013
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Handle: RePEc:zbw:cegedp:164

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Keywords: taxation; democracy; democratic transition; tax innovations;

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