IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Taxability, Elections, and Government Support of Business Activity

  • Scott Gehlbach

    ()

    (University of California — Berkeley and CEFIR)

Registered author(s):

    Politicians care about tax revenues in part because they pay for transfers or public goods which are important to voters, and which are therefore important for the politician’s reelection. When economic sectors differ in their taxability, i.e. the degree to which tax revenues can be extracted by the state, politicians will thus have an incentive to allocate their support for business activity unevenly across sectors. Formalization of this idea shows that politicians will be more inclined to favor high-taxability sectors when transfers or public goods are highly valued by voters, but less likely to do so when a country’s overall tax capacity is high. Further, the allocation of support will depend on the relative size of the low- and high-taxability sectors, but not on the number of recipients of government transfers. Drawing upon a survey of firms in twenty-three postcommunist countries - where overall tax capacity is in many places quite low, differences in taxability across sectors is typically high, and government support for business activity is often lacking - the model’s predictions are shown to hold generally in countries with well-developed political rights and civil liberties, but only partially in the rest of the postcommunist world. Politicians in more democratic countries seem to be motivated by the electoral concerns central to this paper, while their counterparts in less democratic states appear to be driven by revenue considerations for nonelectoral reasons.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.cefir.ru/papers/WP30.pdf
    Download Restriction: no

    Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0030.

    as
    in new window

    Length: 60 pages
    Date of creation: Mar 2003
    Date of revision:
    Handle: RePEc:cfr:cefirw:w0030
    Contact details of provider: Postal: 117418 Russia, Moscow, Nakhimovsky pr., 47, office 720
    Phone: +7 (495) 105 50 02
    Fax: +7 (495) 105 50 03
    Web page: http://www.cefir.ru
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Guriev, Sergei, 2003. "Red Tape and Corruption," CEPR Discussion Papers 3972, C.E.P.R. Discussion Papers.
    2. Jiahua Che & Yingyi Qian, . "Insecure Property Rights and Government Ownership of Firms," Working Papers 97050, Stanford University, Department of Economics.
    3. Persson, Torsten & Tabellini , Guido, 1997. "Political Economics and Macroeconomic Policy," Seminar Papers 630, Stockholm University, Institute for International Economic Studies.
    4. Scott Gehlbach, 2003. "Taxability and Low-Productivity Traps," Working Papers w0029, Center for Economic and Financial Research (CEFIR).
    5. Scott Gehlbach, 2003. "Taxability and Government Support of Business Activity: Testing Theories of Social-Contract Failure," Working Papers w0028, Center for Economic and Financial Research (CEFIR).
    6. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 183-98, January.
    7. Frye, Timothy & Zhuravskaya, Ekaterina, 2000. "Rackets, Regulation, and the Rule of Law," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(2), pages 478-502, October.
    8. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The economics of career concerns: part 2 :application to missions and accountability of government agencies," ULB Institutional Repository 2013/9641, ULB -- Universite Libre de Bruxelles.
    9. George C. Tsibouris & Vito Tanzi, 2000. "Fiscal Reform Over Ten Years of Transition," IMF Working Papers 00/113, International Monetary Fund.
    10. Frye, Timothy & Shleifer, Andrei, 1997. "The Invisible Hand and the Grabbing Hand," American Economic Review, American Economic Association, vol. 87(2), pages 354-58, May.
    11. Roger H. Gorden & David D. Li, 1997. "Taxes and Government Incentives: Eastern Europe vs. China," William Davidson Institute Working Papers Series 56, William Davidson Institute at the University of Michigan.
    12. Andrei Shleifer, 1996. "Government in Transition," Harvard Institute of Economic Research Working Papers 1783, Harvard - Institute of Economic Research.
    13. Drew Fudenberg & Jean Tirole, 1986. "A "Signal-Jamming" Theory of Predation," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 366-376, Autumn.
    14. Waller, C.J. & Verdier, T. & Gardner, R., 1999. "Corruption: Top Down or Bottom Up?," Papers 1999-12, Laval - Laboratoire Econometrie.
    15. Gordon, Roger H & Li, David Daokui, 1997. "Taxes and Government Incentives: Eastern Europe vs. China," CEPR Discussion Papers 1657, C.E.P.R. Discussion Papers.
    16. Vlad Ivanenko, 2001. "Effective Tax Rates in Transition," William Davidson Institute Working Papers Series 378, William Davidson Institute at the University of Michigan.
    17. Liam P. Ebrill, 1999. "Tax Reform in the Baltics, Russia, and Other Countries of the Former Soviet Union," IMF Occasional Papers 182, International Monetary Fund.
    18. Zhuravskaya Ekatherina, 2000. "Incentives to Provide Local Public Goods: Fiscal Federalism, Russian Style," EERC Working Paper Series 99-15e, EERC Research Network, Russia and CIS.
    19. Simon Johnson & John McMillan & Christopher Woodruff, 2000. "Entrepreneurs and the Ordering of Institutional Reform: Poland, Slovakia, Romania, Russia and Ukraine Compared," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 1-36, March.
    20. Mark E. Schaffer & Gerard Turley, 2000. "Effective versus Statutory Taxation: Measuring Effective Tax Administration in Transition Economies," William Davidson Institute Working Papers Series 347, William Davidson Institute at the University of Michigan.
    21. Martinez-Vazquez, Jorge & McNab, Robert M., 2000. "The Tax Reform Experiment in Transitional Countries," National Tax Journal, National Tax Association, vol. 53(n. 2), pages 273-98, June.
    22. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," NBER Working Papers 8460, National Bureau of Economic Research, Inc.
    23. repec:rus:hseeco:128956 is not listed on IDEAS
    24. Lambert-Mogiliansky, Ariane & Sonin, Konstantin & Zhuravskaya, Ekaterina, 2000. "Capture of Bankruptcy: Theory and Evidence from Russia," CEPR Discussion Papers 2488, C.E.P.R. Discussion Papers.
    25. repec:cup:cbooks:9780521027922 is not listed on IDEAS
    26. Susanne Lohmann, 1998. "Rationalizing the Political Business Cycle: A Workhorse Model," Economics and Politics, Wiley Blackwell, vol. 10(1), pages 1-17, 03.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:cfr:cefirw:w0030. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia Babich)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.