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Abstract
Does taxation promote democracy? Revisiting this question, I hypothesize that the effects of taxation on democracy tend to be relatively stronger in unequal societies because higher income inequality can amplify the extent to which citizens dissatisfied with higher levels of taxation want to soak elites. Using event history models to analyze a pooled time-series dataset of regime transitions that cover all countries from 1970 to 2000 if data are applicable, I find empirical evidence that taxation has a conditional impact on democratization, but not on democratic breakdown. According to the theory, higher taxation levels and greater income inequality should tend to promote democracy.
Acknowledgments
The author wishes to thank Evelyne Huber, John Stephens, Layna Mosley, Andrew Reynolds, Tom Carsey, and anonymous reviewers for their help in preparing this article. This work was supported by Hankuk University of Foreign Studies Research Fund of 2012.
Notes
aNote that Cox models do not contain a constant. It is absorbed into the baseline hazard.
1. For an analytical model of the nexus between taxation and democracy, see Bates and Lien (Citation1985).
2. I borrow my terminology, the effects of low demand and high supply, from Ulfelder’s (Citation2007, p. 997) lexicon, ‘demand-side and supply-side explanations’.
3. See Gleditsch and Ward (Citation1997) for critiques of practices to handle the Polity as continuous measures of democracy.
4. See Long and Freese (Citation2005, chap. 5) for a more thorough discussion of this issue.
5. For a quantitative and analytical model, see Boix (Citation2003).
6. For a review of empirical studies on this issue, see Houle (Citation2009, Table 1).
7. Houle (2009, pp. 595–598) argues that, contrary to its effect on democratization, inequality’s effect on democratic breakdown (in his term, ‘consolidation’) is straightforward; inequality increases the likelihood of democratic breakdown because it only influences the payoff of elites (increase in costs from redistribution) but not that of citizens.
8. I use the term consolidation in a general mode to denote regime change in which partial democracies move up the ladder. There are no theoretical connotations for the definition of this change.
9. The World Tax Database at the University of Michigan provides taxation data only for 1970–2000.
10. For more information, visit http://www.wider.unu.edu/wiid/wiid.htm and look at the user’s guide.
11. David and Moeschberger (Citation1978) provide general discussions of competing risks models. For an example of an independent competing risks model, see Zorn and Van Winkle (2000), and for some methodological shortcomings of this approach, see Gordon (Citation2002).
12. For the Cox models, I employ the Efron method for the approximation of the partial likelihood function because it provides a more accurate approximation than the Breslow method when a large number of tied cases exist.
13. On the issue of model selection, see Box-Steffensmeier and Jones (Citation2004, chap. 6).
14. I also run the model with 5-year or 10-year lags of Tax/Exp, following Ross (Citation2004), but do not find its statistical significance.
15. It is straightforward to get a t-test on the effect of Tax/Exp when Inequality is at its mean value. The parameter of Tax/Exp in Model 3 can be directly evaluated because it captures the effect of Tax/Exp when Inequality is at 0, which is its centered mean.
16. It is interesting that GDP per capita becomes strongly significant in all models when regional dummies are controlled.