Political Competition and Tax Revenues in Developing Countries

Abstract

Building on the literature of the political economy of taxation, this article explores the relationship between political competition and tax revenues using a sample of 89 developing countries from 1988 to 2010. Owing to the inertia of tax variables, we estimate a dynamic panel data model using the Blundell and Bond two-step System-general method of moments. The analysis led to the following results: political competition positively and significantly affects total tax revenues. However, this general pattern slightly differs across the type of taxes; and the net effect of political competition on tax revenues is negative for countries that have adopted fiscal rules. © 2018 UNU-WIDER. Journal of International Development published by John Wiley & Sons, Ltd.