The Political Economy of Taxation pptx

[...]... such as the level of GDP per worker, the openness of the economy, the level of debt and the share of agriculture, and with other socio-economic factors, such as the age of the population, female labour force participation, urbanization, population density, schooling enrolment and the extension of the shadow economy Many rigorous empirical studies have analysed developing countries and their political. .. for their action against the regime The trade-off between democratization, other types of concessions (the ‘liberalization’ in the sense of O’Donnell and Schmitter, 1986) and repression has to be considered Notice that also Boix (2003) develops a comprehensive theory of the occurrence of democracy based on the distribution of income and the nature of economic assets and on the political balance of power... risky nor too costly for the elites.4 In all other cases, the threat will wring promises by the elites to future pro-citizen policies To make these concessions credible, a formal transfer of the de jure political power from the elites to the majority of citizens is needed, meaning 5 6 The political economy of taxation that democratization has to happen In this way, the majority of the population will be... increases 16 The political economy of taxation The volatility of the income will also affect the magnitude of the welfare state If the fluctuation of income increases (for example as a consequence of industrial accidents or joblessness) and informal family help is not contemplated, then voters who are averse to risk may want to stabilize their economic position by raising public spending The political. .. conclusions 4 The political economy of taxation NOTE 1 Our source of fiscal data for new EU members is Eurostat From 1995, national accounts data are generally available in the ESA95 (European System of Accounts 95) format 2 The political economy of democracies: a review of the literature The existing political economy literature on democracies deals with two important questions: (i) what are the socio-economic... three other fundamental economic determinants of the share of tax revenue over GDP: the share of agriculture over GDP, the openness of the economy as a percentage of GDP and the debt/GDP ratio.3 Figure 3.2 shows for our sample of countries a negative association between tax revenue and the share of agriculture in GDP.4 A country’s economic structure is one of the main elements that may influence the level... structure is one of the main elements that may influence the level of taxation, since some sectors of the economy are easier to tax than others For developing countries, the share of agriculture is predicted to be negatively related to the level of tax revenue (Tanzi, 1992; Ghura, 1998) The reason is twofold On the supply 22 The political economy of taxation PH 40 HU SI CZ PL SK EE LV CYLT 30 Tax revenue VN... outcomes The second tenet concerns the distribution of political power This would be more equal than the distribution of income or wealth and, as a consequence, democracy would massively redistribute from rich to poor, while under authoritarian regimes the level of redistributive spending should be minimal The third tenet of the formal voting theory emphasizes the importance of the form of the voting... game’ On the contrary, there are positive theories of public policy such as The political economy of democracies 15 those of Barro (1979) and Wittman (1989) that focus on efficiency considerations as the main determinants of public policy There is no room for political factors These theories are also related to Stigler (1970), Peltzman (1980) and Becker (1983)’s works, that is to the Chicago Political. .. size of the public sector should be small, a substantial part of the electorate being excluded from the decisionmaking process So, independent of the type of economy, the level of redistributive spending should be minimal A transition to democracy, on the contrary, should raise taxes and public spending in accordance with the electoral turnout and the position of the median voter, but also with the . The Political Economy of Taxation