Trust in Government and the Willingness to Pay Taxes in Transition Countries
26 Pages Posted: 29 Aug 2015
Date Written: July 11, 2015
Abstract
This paper examines citizen trust in government, willingness to pay taxes, and desire for redistribution in transition countries. A theoretical model of trust in government is developed explaining willingness to pay (WTP) for public goods and empirical models are estimated for improved public education, improved public health system, combating climate change, helping the needy, and income redistribution. Data are from the European Bank for Reconstruction and Development's Life in Transition Survey, 2010 (LITS II). Results confirm the theoretical model, with trust in government having a significant positive effect on WTP for public goods. Differences are found, however, among government institutions and public goods. Income is a significant factor contributing to trust in all social institutions, including government. Higher income citizens have greater WTP for public goods, including income redistribution. The possibility of upward mobility hypothesis is confirmed, with citizens expecting future income to be higher than current income being less supportive of redistribution.
Keywords: trust in government, transition economies, willingness to pay taxes, redistribution, taxation
JEL Classification: H11, H31, H41
Suggested Citation: Suggested Citation