Tax contracts and elections


Gersbach, H. and Schneider, M., 2012. Tax contracts and elections. European Economic Review, 56 (7), pp. 1461-1479.

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    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 and voters may behave strategically. 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 unambiguously improve the welfare of the median voter.


    Item Type Articles
    CreatorsGersbach, H.and Schneider, M.
    Uncontrolled Keywordspolitical contracts,elections,government formation,political economy,tax promise,economics and econometrics
    DepartmentsFaculty of Humanities & Social Sciences > Economics
    ID Code43328


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