Ideology and Taxation in Latin America

32 Pages Posted: 24 Sep 2013

See all articles by Ernesto Stein

Ernesto Stein

Inter-American Development Bank (IDB)

Lorena Caro

affiliation not provided to SSRN

Date Written: May 2013

Abstract

This paper examines the impact of ideology on tax revenues in Latin America, using a panel of 17 countries from 1990 to 2010. As a first approach, a fixed- effects model is used to identify the impact of ideology on taxation; left-leaning governments are associated with increases in total tax revenues and income tax revenues of 2. 1 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 and a difference in difference methodology are used to track the behavior of revenues around the time of the shifts to the left. Tax revenues and income tax revenues increase by 1. 5 and 0. 8 percent of GDP when comparing revenues immediately before and after the shift in ideology. The pattern of tax revenues around ideological shifts suggests that the effects are causal.

JEL Classification: H20, P16

Suggested Citation

Stein, Ernesto Hugo and Caro, Lorena, Ideology and Taxation in Latin America (May 2013). IDB Working Paper No. IDB-WP-407, Available at SSRN: https://ssrn.com/abstract=2330185 or http://dx.doi.org/10.2139/ssrn.2330185

Ernesto Hugo Stein (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue, NW
Research Department
Washington, DC 20577
United States

Lorena Caro

affiliation not provided to SSRN

No Address Available

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