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Ideology and taxation in Latin America

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  • Stein, Ernesto
  • Caro, Lorena

Abstract

This paper examines the impact of ideology on tax revenues in Latin America, using a panel of seventeen countries from 1990 to 2010. As a first approach, a fixed-effects model is used to identify the impact of government ideology on taxation; left-leaning governments are associated with increases in total tax revenues and income tax revenues of 2.2 and 1.3 percent of GDP, respectively. There is no effect on revenues from VAT or social security taxes. To deal with endogeneity problems, an event study methodology is used to track the behavior of revenues around the time of the shifts to the left. A comparison of revenues immediately before and after the shift in government ideology shows that revenues and income tax revenues increase by 1.3 and 0.8 percent of GDP. JEL Classifications: H20, P16

Suggested Citation

  • Stein, Ernesto & Caro, Lorena, 2017. "Ideology and taxation in Latin America," LSE Research Online Documents on Economics 123080, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:123080
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    More about this item

    Keywords

    ideology; taxation; event study;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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