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No taxation, no democracy? Taxation, income inequality, and democracy


  • Dae Jin Yi


Does taxation promote democracy? Revisiting this question, I hypothesize that the effects of taxation on democracy tend to be relatively stronger in unequal societies because higher income inequality can amplify the extent to which citizens dissatisfied with higher levels of taxation want to soak elites. Using event history models to analyze a pooled time-series dataset of regime transitions that cover all countries from 1970 to 2000 if data are applicable, I find empirical evidence that taxation has a conditional impact on democratization, but not on democratic breakdown. According to the theory, higher taxation levels and greater income inequality should tend to promote democracy.

Suggested Citation

  • Dae Jin Yi, 2012. "No taxation, no democracy? Taxation, income inequality, and democracy," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 15(2), pages 71-92, June.
  • Handle: RePEc:taf:jpolrf:v:15:y:2012:i:2:p:71-92 DOI: 10.1080/17487870.2012.672252

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    References listed on IDEAS

    1. Martin C. McGuire & Mancur Olson Jr., 1996. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 72-96, March.
    2. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    3. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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    Cited by:

    1. Muhammed N. Islam, 2016. "Does democracy reduce income inequality?," Empirical Economics, Springer, vol. 51(4), pages 1299-1318, December.
    2. Beate Jochimsen & Christian Raffer, 2016. "Herausforderungen bei der Messung von Wohlfahrt," Discussion Papers of DIW Berlin 1595, DIW Berlin, German Institute for Economic Research.

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