Death & Taxes: Ethnicity and State Capacities in Health and Revenue

• In Event: 504 - Section on Economic Sociology Paper Session. The Economic Sociology of Development

Abstract

Drawing on economic sociology’s fiscal contract, we examine how ethnic diversity affects the twin aspects of the fiscal contract in the Global South: revenue generation and public goods provision. Taxation and health represent two essential tasks of statehood, both of which can be inclusive or exclusive, providing an excellent forum for understanding how ethnic diversity shapes state institutions.

Using cross-national statistical analysis, we examine measures capturing both high-level policy directions and grassroots functioning of state institutions. We analyze change and level of childhood mortality and tariff rates and percentage of revenue from trade taxes. These are important policy directions confronting elites, affecting how costs and benefits are distributed throughout society. To examine grassroots bureaucratic effects, we analyze bribery in the medical and tax sectors. We find that population ethnic demographics are more important predictors of bribery, but diversity of ruling coalitions is a stronger predictor of policy outcomes like child mortality and taxation strategies.

We find bribery is highest where the population share excluded from political power on the basis of ethnicity is highest. More homogenous ruling coalitions were less reliant on institutionally simplistic taxation like tariff and trade taxes. We argue tight-knit homogenous coalitions were able to enact more complicated (and fiscally stable) forms of taxation. Diverse ruling coalitions were also less effective at implementing inclusive health policies, having the highest levels of current childhood mortality, and the lowest levels of change over the last decade, controlling for region, colonial status, GDP per capita and inequality.

Authors

• Erin Metz McDonnell, University of Notre Dame

• Megan J. Austin, University of Notre Dame