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Elections and the structure of taxation in developing countries

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  • Ehrhart, H.

Abstract

This article analyses the impact of the electoral calendar on the composition of tax revenue (direct versus indirect taxes). It thus represents an extension of traditional political budget-cycle analyses assessing the impact of elections on overall revenue. Panel data from 56 developing countries over the 1980-2006 period reveals a clear pattern of electorally-related policy interventions. Taking the potential endogeneity of election timing into account, we find robust evidence of lower indirect taxes being applied by incumbent governments in the period just prior to an election. Indirect tax revenue in election years is estimated to be 0.3 GDP percentage points lower than in other years, corresponding to a fall of about 3.4% of the average figure in the sample countries, while there is no such relationship with direct tax revenue.

Suggested Citation

  • Ehrhart, H., 2013. "Elections and the structure of taxation in developing countries," Working papers 419, Banque de France.
  • Handle: RePEc:bfr:banfra:419
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    More about this item

    Keywords

    Political budget cycles; Elections; Taxation; Developing countries.;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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