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On the Political Economics of Tax Reforms: survey and empirical assessment

Author

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  • Micael Castanheira De Moura
  • Gaëtan Nicodème
  • Paola Profeta

Abstract

Political constraints and incentives are the true driver of tax reforms. Thispaper reviews the political economics literature on personal income tax systems andreforms to see how political mechanisms help explain tax reforms. We take some ofthe implications of these theories to the data using LABREF, a database that identifieslabor tax reforms in the European Union for the period 2000–2007, and control foreconomic and labor market factors.We find that political variables carry more weightthan economic variables, and we show empirical regularities that support politicaleconomy theories. We also find that governments tended to reform more in bettereconomic times, engaging in pro-cyclical behavior

Suggested Citation

  • Micael Castanheira De Moura & Gaëtan Nicodème & Paola Profeta, 2012. "On the Political Economics of Tax Reforms: survey and empirical assessment," ULB Institutional Repository 2013/136798, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/136798
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    More about this item

    Keywords

    Political economy · Taxation · Personal income tax · LABREF;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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