Tax Contracts and Elections

Hans Gersbach and Maik Schneider

No 9054, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this paper we examine the impact of tax contracts, a novel instrument, on elections, policies, and welfare. We consider a political game in which three parties compete to form the government and voters may behave strategically. Parties have policy preferences about the level of public-good provision and benefit from perks when in office. A government raises taxes for both purposes. We show that tax contracts yield moderate policies and lead to lower perks by avoiding the formation of grand coalitions in order to win government. Moreover, in polarized societies they unambiguously improve the welfare of the median voter.

Keywords: Elections; Government formation; Political contracts; Tax promise (search for similar items in EconPapers)
JEL-codes: D72 D82 H55 (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pol
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Tax contracts and elections (2012)
Working Paper: Tax Contracts and Elections (2009)
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