Simply Running Out of Money? Natural Resource Price Shock and Tax Introduction

• In Event: The Political Economy of Taxation

Abstract

Fiscal capacity development is essential to state building, and taxation is the centrepiece of fiscal capacity development. Existing literature has mainly concentrated on a few key variables to explain the development of revenue instruments, such as war, democratisation, and socio-economic modernisation. To complement the existing strands of research on tax innovation, we focus on the relationship between tax introductions and a specific type of fiscal shock, natural resource price change, as commodity price shocks constitute a potential critical juncture where rentier governments have to tap into alternative sources of revenues. To do so, we combine global data on tax introductions and real commodity prices dating back to the 1800s. Using event history analysis and case studies, we empirically test how natural resource price shock affects the introduction of different types of taxes. Moreover, we also examine how the effects of price change on tax introductions are conditioned by regime types, ideological alliances, and colonial legacy.

Authors

• Chendi Wang, Vrije Universiteit Amsterdam

• Youssef Mnaili, European University Institute