Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/89059 
Year of Publication: 
2013
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-407
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
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: 
H20
P16
Document Type: 
Working Paper

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