Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171566
Authors: 
Gersbach, Hans
Schneider, Maik T.
Year of Publication: 
2009
Series/Report no.: 
Economics Working Paper Series 09/123
Abstract: 
In this paper we examine the impact of tax contracts as a novel institution on elections, policies, and welfare. We consider a political game in which three parties compete to form the government. Parties have policy preferences about the level of public-good provision and benefit from perks when in office. A government raises taxes for both purposes. We show that tax contracts yield moderate policies and lead to lower perks by avoiding the formation of grand coalitions in order to win government. Moreover, in polarized societies they unambigously improve the welfare of the median voter.
Subjects: 
political contracts
elections
government formation
tax promise
JEL: 
D72
D82
H55
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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