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Revenue Traps

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  • SCOTT GEHLBACH

Abstract

When state officials care about tax revenue and factors of production are mobile across economic sectors, political economies organize themselves into equilibria where officials promote sectors to which resources are allocated, which in turn encourages that resource allocation. Differences across sectors in the ability of officials to extract revenues may result in a “revenue trap”: the persistence of a low‐productivity equilibrium even in the presence of large shocks to resource allocation. I argue that the failure of privatization in part of the postcommunist world to effect a shift toward new private economic activity resulted in part from such a trap.

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  • Scott Gehlbach, 2007. "Revenue Traps," Economics and Politics, Wiley Blackwell, vol. 19(1), pages 73-96, March.
    • Handle: RePEc:bla:ecopol:v:19:y:2007:i:1:p:73-96
    DOI: 10.1111/j.1468-0343.2007.00303.x
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    Cited by:

    1. Ismoil Khujamkulov, "undated". "Tax revenues in transition countries: Structural changes and their policy implications," WIDER Working Paper Series 180, World Institute for Development Economic Research (UNU-WIDER).
    2. Ethan Bueno De Mesquita & Catherine Hafer, 2008. "Public Protection Or Private Extortion?," Economics and Politics, Wiley Blackwell, vol. 20(1), pages 1-32, March.

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