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On the Political Economics of Tax Reforms: survey and empirical assessment

  • Micael Castanheira De Moura
  • Gaëtan Nicodème
  • Paola Profeta

Political constraints and incentives are the true driver of tax reforms. Thispaper reviews the political economics literature on personal income tax systems andreforms to see how political mechanisms help explain tax reforms. We take some ofthe implications of these theories to the data using LABREF, a database that identifieslabor tax reforms in the European Union for the period 2000–2007, and control foreconomic and labor market factors.We find that political variables carry more weightthan economic variables, and we show empirical regularities that support politicaleconomy theories. We also find that governments tended to reform more in bettereconomic times, engaging in pro-cyclical behavior

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/136798.

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Date of creation: 01 May 2012
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Publication status: Published in: International tax and public finance (2012) v.19 n° 4,p.1-27
Handle: RePEc:ulb:ulbeco:2013/136798
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