Tax contracts and elections

Hans Gersbach and Maik Schneider

European Economic Review, 2012, vol. 56, issue 7, 1461-1479

Abstract: In this paper we examine the impact of tax contracts as a novel institution 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: Political contracts; Elections; Government formation; Tax promise (search for similar items in EconPapers)
JEL-codes: D72 D82 H55 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Tax Contracts and Elections (2012)
Working Paper: Tax Contracts and Elections (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:56:y:2012:i:7:p:1461-1479

DOI: 10.1016/j.euroecorev.2012.06.002

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