Taxation and democratization

Thushyanthan Baskaran

No 164, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: Anecdotal 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 had on average a mild positive effect on democracy.

Keywords: taxation; democracy; democratic transition; tax innovations (search for similar items in EconPapers)
JEL-codes: H20 O23 P14 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-pbe, nep-pol and nep-pub
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Journal Article: Taxation and Democratization (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:164

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