On the political economy of national tax revenue forecasts: evidence from OECD countries

Beate Jochimsen and Robert Lehmann

Public Choice, 2017, vol. 170, issue 3, No 3, 230 pages

Abstract: Abstract Sustainable budgets are important quality signals for the electorate. Politicians might thus have an incentive to influence tax revenue forecasts, which are widely regarded as a key element of national budget plans. Looking at the time period from 1996 to 2012, we systematically analyze whether national tax revenue forecasts in 18 OECD countries are biased due to political manipulation. Drawing on theories from the field of political economy, we test three hypotheses using panel estimation techniques. We find support for partisan politics. Left-wing governments seem to produce more optimistic, or less pessimistic, tax revenue forecasts than do right-wing ones. Contrary to the theoretical prediction based on the “common pool” problem, we find that more fragmented governments and parliaments tend to produce more pessimistic, or less optimistic, tax revenue forecasts. We find no empirical evidence that political business cycles play a role in tax revenue forecasts.

Keywords: Political economy; Tax revenue forecasts; Fragmentation; Partisan politics (search for similar items in EconPapers)
JEL-codes: F59 H11 H30 H68 P16 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://link.springer.com/10.1007/s11127-016-0391-y Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: On the political economy of national tax revenue forecasts: evidence from OECD countries (2017)
Working Paper: On the political economy of national tax revenue forecasts – Evidence from OECD countries (2015)
Working Paper: Do OECD countries cheat with their national tax revenue forecasts? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:170:y:2017:i:3:d:10.1007_s11127-016-0391-y

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11127/PS2

DOI: 10.1007/s11127-016-0391-y

Access Statistics for this article

Public Choice is currently edited by WIlliam F. Shughart II

More articles in Public Choice from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().