Do gains in political representation sweeten tax reform in China? It depends on who you ask

Abstract

Governments can grant political concessions to induce quasi-voluntary compliance with taxation, yet empirical evidence probing the taxation–representation connection remains inconclusive. We contend that this association remains valid but it is primarily confined to business elites in nondemocratic regimes because the same wealth that exposes them to state predation also incentivizes them to endorse tax policies that offer greater political representation. We test our argument by evaluating preferences for hypothetical tax reforms in separate samples of business elites and ordinary citizens in China. We find that business elites show stronger preference than nonelites for tax policies that include advances in political representation. We explore various mechanisms for our results and find support for government credibility, tax ownership, and tax salience considerations.

Non-Meritocrats or Conformist Meritocrats? A Redistribution Experiment in China and France

“…In our study, respondents whose parents have closer involvements in the private market economy are significantly less likely to play status quo. We consider this a supportive piece of evidence that private economy exposure increases political agency, which is also documented in the Chinese context by Li et al (2006) and Kao et al (2022): the former empirically demonstrates that private entrepreneurs are more likely to enter politics in areas with weak market infrastructures, while the latter shows that entrepreneurial elites are more likely to ask for political representation, in contrast with the rest of the population who prefer public services. Our findings also echo the hypothesis made by Nisbett (2004) that trade activities in Ancient Greek culture explain its debate culture compared to agricultural Ancient China.…”

“…Moreover, they are also more comfortable getting politically involved to defend their own interests. For example, the survey experiment by Kao et al (2022) shows that, in exchange for a reform that would raise taxes, Chinese entrepreneurs prefer political representation while the rest of the population demand public services. Li et al (2006) further show that Chinese entrepreneurs are more likely to enter politics in areas with worse market-supporting institutions.…”

Institutions, interests, and policy support: Experimental evidence from China

“…Citizens may be more sensitive to economic benefits in developing countries. Material interests tend to overshadow political institutions among ordinary citizens, especially for the poor in developing countries (Kao et al, 2021). Citizens have low income and are sensitive to policy costs.…”