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Ideology and Taxation in Latin America

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  • Ernesto Stein
  • Lorena Caro

Abstract

This paper examines the impact of ideology on tax revenues in Latin America, using a panel of seventeen countries from 1990 to 2010. As a rst approach, a xed­effects model is used to identify the impact of government ideology on taxation; left­leaning governments are associated with increases in total tax revenues and income tax revenues of 2.2 and 1.3 percent of GDP, respectively. There is no effect on revenues from VAT or social security taxes. To deal with endogeneity problems, an event study methodology is used to track the behavior of revenues around the time of the shifts to the left. A comparison of revenues immediately before and after the shift in government ideology shows that revenues and income tax revenues increase by 1.3 and 0.8 percent of GDP.

Suggested Citation

  • Ernesto Stein & Lorena Caro, 2017. "Ideology and Taxation in Latin America," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 1-27.
    • Handle: RePEc:col:000425:015503
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    Cited by:

    1. Schützhofer, Timm B., 2016. "Ecuador’s fiscal policies in the context of the citizens’ revolution: a ‘virtuous cycle’ and its limits," IDOS Discussion Papers 15/2016, German Institute of Development and Sustainability (IDOS).
    2. Hallerberg, Mark & Scartascini, Carlos, 2017. "Explaining changes in tax burdens in Latin America: Do politics trump economics?," European Journal of Political Economy, Elsevier, vol. 48(C), pages 162-179.
    3. German Feierherd & Patricio Larroulet & Wei Long, & Nora Lustig, 2021. "The Pink Tide and Inequality in Latin America," Working Papers 2105, Tulane University, Department of Economics.
    4. Ardanaz, Martín & Ulloa-Suárez, Carolina & Valencia, Oscar, 2024. "Why don't we follow the rules? Drivers of compliance with fiscal policy rules in emerging markets," Journal of International Money and Finance, Elsevier, vol. 142(C).
    5. von Schiller, Armin, 2015. "Party System Institutionalization and Reliance on Personal Income Tax in Developing Countries," IDB Publications (Working Papers) 7351, Inter-American Development Bank.
    6. Keefer, Philip & Milanovic, Branko, 2014. "Party Age and Party Color: New Results on the Political Economy of Redistribution and Inequality," IDB Publications (Working Papers) 6745, Inter-American Development Bank.
    7. Bird, Richard M. & Zolt, Eric M., 2015. "Fiscal Contracting in Latin America," World Development, Elsevier, vol. 67(C), pages 323-335.
    8. Darío Rossignolo, 2015. "El Impuesto sobre la renta Personal y los altos ingresos en América Latina," Hacienda Pública Española / Review of Public Economics, IEF, vol. 214(3), pages 115-148, September.
    9. Marcus André Melo & Armando Barrientos & André Canuto Coelho, 2014. "Taxation, redistribution and the social contract in Brazil," Global Development Institute Working Paper Series iriba_wp11, GDI, The University of Manchester.

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    Keywords

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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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