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Taxation and More Representation?: On Fiscal Policy, Social Mobility and Democracy in Latin America

Author

Listed:
  • Christian Daude

    (OECD)

  • Ángel Melguizo

    (OECD)

Abstract

Is the social contract in Latin America broken? Many authors have suggested this is the case, given the high levels of inequality, the low levels of taxation and the low quality of public services observed in the region. This paper analyses empirically the relationship between fiscal policy, social mobility and democratic consolidation in Latin America and the Caribbean, using the 2007 and 2008 rounds of the regional Latinobarómetro survey. In general, our results do not firmly support the prospect of upward mobility hypothesis, and show that the perception about the quality of public services, among others, matters for the willingness to pay taxes. All in all, we interpret our results as an indication of that – although there is still a long way to go – the potential basis for a stronger social contract in Latin America exists. Le contrat social est-il brisé (en crise) en Amérique latine ? C’est ce que de nombreux auteurs laissent entendre, qui s’appuient sur les fortes inégalités, le faible niveau de taxation et le manque de qualité des services publics de la région. Cet article analyse de façon empirique la relation entre la politique budgétaire, la mobilité sociale et la consolidation démocratique en Amérique latine et dans les Caraïbes, en utilisant les enquêtes régionales Latinobarómetro pour 2007 et 2008. D’une façon générale, nos résultats ne confortent pas complètement l’hypothèse de perspectives de mobilité sociale ascendante (POUM), et montrent l’influence de la perception de la qualité des services publics, entre autres choses, sur la disposition des contribuables à s’acquitter de leurs taxes et impôts. Bien qu’un long chemin reste encore à parcourir, nos résultats semblent globalement indiquer qu’il existe une base pour un renforcement du contrat social en Amérique Latine.

Suggested Citation

  • Christian Daude & Ángel Melguizo, 2010. "Taxation and More Representation?: On Fiscal Policy, Social Mobility and Democracy in Latin America," OECD Development Centre Working Papers 294, OECD Publishing.
  • Handle: RePEc:oec:devaaa:294-en
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    File URL: http://dx.doi.org/10.1787/5km5zrrs9bbt-en
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    Cited by:

    1. Colin C. Williams & Ioana A. Horodnic, 2015. "Explaining and tackling the shadow economy in Estonia, Latvia and Lithuania: a tax morale approach," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 15(2), pages 81-98.
    2. Richard M. Bird & Eric M. Zolt, 2014. "Taxation and inequality in the Americas: Changing the fiscal contract?," Chapters,in: Taxation and Development: The Weakest Link?, chapter 7, pages 193-237 Edward Elgar Publishing.
    3. Cyan, Musharraf R. & Koumpias, Antonios M. & Martinez-Vazquez, Jorge, 2016. "The determinants of tax morale in Pakistan," Journal of Asian Economics, Elsevier, vol. 47(C), pages 23-34.
    4. Pedro L. Rodríguez, José R. Morales, Fancisco J. Monaldi, 2012. "Direct Distribution of Oil Revenues in Venezuela: A Viable Alternative?," Working Papers 306, Center for Global Development.
    5. Andy Sumner, 2012. "The Buoyant Billions: How “Middle Class” Are the New Middle Classes in Developing Countries? (And Why Does It Matter?)," Working Papers 309, Center for Global Development.
    6. Cornia, Giovanni Andrea & Martorano, Bruno, 2011. "A New Fiscal Pact, Tax Policy Changes and Income Inequality," WIDER Working Paper Series 070, World Institute for Development Economic Research (UNU-WIDER).
    7. 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.
    8. Andy Sumner, 2012. "Where Will the World’s Poor Live? An Update on Global Poverty and the New Bottom Billion," Working Papers 305, Center for Global Development.
    9. Colin C Williams & Ioana Alexandra Horodnic, 2016. "An institutional theory of the informal economy: some lessons from the United Kingdom," International Journal of Social Economics, Emerald Group Publishing, vol. 43(7), pages 722-738, July.
    10. Andy Sumner, 2012. "The Buoyant Billions: How “Middle Class†Are the New Middle Classes in Developing Countries? (And Why Does It Matter?)," Working Papers id:5169, eSocialSciences.

    More about this item

    Keywords

    Amérique latine; democracy; Démocratie; fiscal policy; Latin America; mobilité sociale; politique budgétaire; social mobility;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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