Seigniorage and Political Stabiliity

Alex Cukierman, Sebastian Edwards and Guido Tabellini

No 381, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The importance of seigniorage relative to other sources of government revenue differs markedly across countries. The main theoretical implication of this paper is that countries with more unstable and polarized political systems rely more heavily on seigniorage. This result is obtained within the context of a political model of tax reform. The model implies that the more unstable and polarized the political system, the more inefficient is the equilibrium tax structure (in the sense that tax collection is more costly to administer), and the higher therefore the reliance on seigniorage. This prediction of the model is tested on cross-section data for 79 countries.

Keywords: Government Revenue; Political Systems; Seigniorage; Tax Reform (search for similar items in EconPapers)
Date: 1990-03
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