Article ID Journal Published Year Pages File Type
988783 World Development 2014 15 Pages PDF
Abstract

•This paper studies the effect of taxation on democratization.•The dataset covers 122 countries over the period 1981–2008.•The government revenues to GDP ratio is used as a proxy for taxation.•Instruments for government revenues are value added taxes and autonomous revenue authorities.•The results suggest that taxation has a positive effect on democratization.

SummaryAnecdotal evidence from pre-modern Europe and North America suggests that rulers are forced to become more democratic once they impose a significant fiscal burden on their citizens. One difficulty in testing this “taxation causes democratization” hypothesis empirically is the endogeneity of public revenues. I use introductions of value added taxes and autonomous revenue authorities as sources of quasi-exogenous variation to identify the causal effect of the fiscal burden borne by citizens on democracy. The instrumental variables regressions with a panel of 122 countries over the period 1981–2008 suggest that revenues have on average a mild positive effect on democracy.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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