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Seigniorage and Political Instability

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  • Cukierman, Alex
  • Edwards, Sebastian
  • Tabellini, Guido

Abstract

The importance of seigniorage relative to other sources of government revenue differs markedly across countries. This paper tries to explain this regularity by studying a political model of tax reform. The model implies that countries with a more unstable and polarized political system will have more inefficient tax structures and, thus, will rely more heavily on seigniorage. This prediction of the model is tested on cross-sectional data for seventy countries. The authors find that, after controlling for other variables, political instability is positively associated with seigniorage. Copyright 1992 by American Economic Association.

Suggested Citation

  • Cukierman, Alex & Edwards, Sebastian & Tabellini, Guido, 1992. "Seigniorage and Political Instability," American Economic Review, American Economic Association, vol. 82(3), pages 537-555, June.
    • Handle: RePEc:aea:aecrev:v:82:y:1992:i:3:p:537-55
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