Political Regimes and the Extractive Capacity of Governments: Taxation in Democracies and Dictatorships

Abstract

Recent political and economic transformations in Latin America, Africa, Asia, and Eastern Europe have brought about a renewed interest in the incentives and capabilities of different types of political regimes to implement policies that are deemed necessary for economic development, in particular, policies aimed at increasing tax revenue. One central question is whether democracies can collect as much in taxes as dictatorships. This article addresses this question by examining whether regime type, classified as democracy or dictatorship, has a causal impact on a government's capacity to mobilize resources through taxation. On the basis of data gathered for 108 countries for the period between 1970 and 1990, the article concludes that observed differences across countries regarding the level of taxes collected by the government are not due to the fact that some are under a democracy and others under a dictatorship. Concerns about the inability of democratic regimes to collect taxes are, therefore, unfounded.