DP381 Seigniorage and Political Stabiliity
|Author(s):||Alex Cukierman, Sebastian Edwards, Guido Tabellini|
|Publication Date:||March 1990|
|Keyword(s):||Government Revenue, Political Systems, Seigniorage, Tax Reform|
|JEL(s):||053, 123, 321, 323|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=381|
The importance of seigniorage relative to other sources of government revenue differs markedly across countries. The main theoretical implication of this paper is that countries with more unstable and polarized political systems rely more heavily on seigniorage. This result is obtained within the context of a political model of tax reform. The model implies that the more unstable and polarized the political system, the more inefficient is the equilibrium tax structure (in the sense that tax collection is more costly to administer), and the higher therefore the reliance on seigniorage. This prediction of the model is tested on cross-section data for 79 countries.