Tax Me, but Spend Wisely? Sources of Public Finance and Government Accountability

Abstract

Existing evidence suggests that extra grant revenues lead to little improvements in public services in developing countries -but would governments spend tax revenues differently? This paper considers a program that invests in the tax capacity of Brazilian municipalities. Using variations in the timing of program uptake I find that it raises local tax revenues and that the increase in taxes is used to improve both the quantity and quality of municipal education infrastructure. In contrast increases in grants over which municipalities have the same discretion as over taxes have no impact on any measure of local public infrastructure. These results suggest that the way governments are financed matters: governments spend increases in tax revenues more towards expenditures that benefit citizens than increases in grant revenues. JEL: D72,D73,H20,H77

From the Lab to the Field: A Review of Tax Experiments

“…Other studies have focussed on the relation between taxpaying and public accountability using experimental or quasi-experimental methods, such as Paler (2013), Martin (2014) and Gadenne (2013). However they have been more concerned with testing the hypothesis that reliance on taxes has beneficial e↵ects on public accountability, than with the importance of the latter as a motive for tax compliance.…”

Not Welcome Anymore: The Effect of Electoral Incentives on the Reception of Refugees

“…To deal with this threat, following the intuition developed by Gadenne (2017), I run this modified version of model 5:…”

Accountability and taxation: Experimental evidence

“…The paper relates to the empirical literature using cross-and within-country variation in observational data to investigate the relationship between reliance on tax or windfall revenue and governance indicators such as democratization, provision of public goods, and corruption. This literature largely shows that good governance is positively associated with reliance on tax revenues and negatively associated with reliance on windfall revenues (Ahmadov, 2014;Besley and Persson, 2014;Ross, 2015;Gadenne, 2017;Martínez, 2016;Prichard et al, 2018), with some notable exceptions (Haber and Menaldo, 2011;Herb, 2005). 2 However, with the exception of Martínez (2016) and Gadenne (2017), most of these studies do not identify a causal relationship between tax or windfall revenue and accountability, and do not provide evidence for the underlying mechanisms explaining it.…”

“…Using a panel of 188 countries, Prichard et al (2018) find that democracy correlates negatively with reliance on nontax (unearned) government revenue and positively with reliance on tax revenues. Martínez (2016) and Gadenne (2017) compare increases in tax to increases in oil windfalls in Columbia and windfall grants from the central government in Brazil, respectively. Both studies find that increases in windfall revenues leads to much smaller improvements in public service provision (or, in Gadenne (2017), no improvement at all) than increases in tax revenues.…”