Hostname: page-component-745bb68f8f-d8cs5 Total loading time: 0 Render date: 2025-01-12T12:05:56.379Z Has data issue: false hasContentIssue false
  • English
  • Français

Keeping the Public Purse: An Experiment in Windfalls, Taxes, and the Incentives to Restrain Government

Published online by Cambridge University Press:  05 November 2013

LAURA PALER
LAURA PALER*
Affiliation:
University of Pittsburgh
*
Laura Paler is Assistant Professor, Department of Political Science, University of Pittsburgh. Appendices and additional project materials are available online on the author's personal website. Professor Paler can be contacted at [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

It is widely believed that rents from windfall revenue undermine accountability. An enduring explanation is that windfalls free leaders from the need to tax, producing a quiescent population. Yet, there is little direct evidence of how windfalls and taxes affect citizen political action. I use novel revenue and information experiments to examine whether and why windfalls (compared to taxes) affect how citizens participate in politics. The experiments were embedded in a public awareness campaign conducted with 1,863 citizens in Indonesia. The results—from an original survey and postcard campaign—indicate that the tax treatment increased monitoring and anti-incumbent political action. Yet, when given spending information, citizens in the windfall treatment cared just as much about misused revenue as those in the tax treatment. The findings have important implications for understanding not only how revenue affects citizen political behavior but also how people acquire and process information on government spending.

Type
Research Article
Information
American Political Science Review , Volume 107 , Issue 4 , November 2013 , pp. 706 - 725
Copyright
Copyright © American Political Science Association 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Alt, James, Lassen, David Dreyer, and Skilling, David. 2001. “Fiscal Transparency, Gubernatorial Popularity, and the Scale of Government: Evidence from the States.” Economic Policy Research Centre working paper 16.Google Scholar
Anderson, Michael. 2008. “Multiple Inference and Gender Differences in the Effects of Early Intervention.” Journal of the American Statistical Association 103 (484): 1481–95.CrossRefGoogle Scholar
Auracher, Tim, and Sitepu, Budi. 2011. “Spending other people's money.” http://www.dandc.eu/en/article/become-more-accountable-local-governments-are-set-collect-their-own-taxes.Google Scholar
Banerjee, Abhijit, Kumar, Selvan, Pande, Rohini, and Su, Felix. 2011. “Do Informed Voters Make Better Choices? Experimental Evidence from Urban India.” Working paper.Google Scholar
Bates, Robert, and Lien, D.. 1985. “A Note on Taxation, Development and Representative Government.” Politics and Society 14 (1): 53–70.CrossRefGoogle Scholar
Beblawi, Hazem. 1987. “The Rentier State in the Arab World.” In The Rentier State: Nation, State and the Integration of the Arab World. London: Croom Helm, 85–98.Google Scholar
Beblawi, Hazem, and Luciani, Giacomo. 1987. The Rentier State: Nation, State, and Integration in the Arab World (volume 2). London: Croom Helm.Google Scholar
Becker, Gordon, DeGroot, Morris, and Marschak, Jacob. 1964. “Measuring Utility by a Single-Response Sequential Method.” Behavioral Science 8: 41–55.CrossRefGoogle Scholar
Bjorkman, Martina, and Svensson, Jakob. 2010. “When is Community-Based Monitoring Effective? Evidence from a Randomized Experiment in Primary Health in Uganda.” Journal of the European Economic Association 82 (2–3): 571–81.CrossRefGoogle Scholar
Boix, Carles. 2003. Democracy and Redistribution. New York: Cambridge University Press.CrossRefGoogle Scholar
Bowler, Shaun, and Donovan, Todd. 1995. “Popular Responsiveness to Taxation.” Political Research Quarterly 48 (79): 79–99.CrossRefGoogle Scholar
Brautigam, Deborah. 2002. “Building Leviathan: Revenue, State Capacity and Governance.” In The New Politics of Taxation and Accountability, ed. Moore, Mick and Lisa Rakner. Vol. 33 of IDS Bulletin. Sussex: Institute of Development Studies, 10–9.Google Scholar
Brennan, Geoffrey, and Buchanan, James. 1978. “Tax Instruments as Constraints on the Disposition of Public Revenues.” Journal of Public Economics 9: 301–18.CrossRefGoogle Scholar
Brollo, Fernanda, Nannicini, Tommaso, Perotti, Roberto, and Tabellini, Guido Guido. 2012. “The Political Resource Curse.” American Economic Review 103 (5): 7159–96.Google Scholar
Caselli, Francesco, and Cunningham, Tom. 2009. “Leader Behavior and the Natural Resource Curse.” Oxford Economic Papers 61: 628–50.CrossRefGoogle Scholar
Chaudhry, Kiren. 1997. The Price of Wealth: Economics and Institutions in the Middle East. Ithaca: Cornell University Press.Google Scholar
Chong, Alberto, O, Ana De La, Karlan, Dean, and Wanthekron, Leonard. 2011. “Information Dissemination and Local Governments’ Electoral Returns, Evidence from a Field Experiment in Mexico.” Working paper.Google Scholar
Collier, Paul, and Hoeffler, Anke. 2005. “Democracy and Resource Rents.” Global Poverty Research Group, GPRG-WPS-016.Google Scholar
Cordon, Max, and Neary, Peter. 1982. “Booming Sector and De-Industrialization in a Small Open Economy.” The Economic Journal 92 (368): 852–48.Google Scholar
Devarajan, Shantayanan, Ehrhart, Helene, Le, Tuan Minh, and Raballand, Gael. 2011. “Direct Redistribution, Taxation, and Accountability in Oil-Rich Economies: A proposal.” Center for Global Development working paper 281.Google Scholar
Downs, Anthony. 1957. An Economic Theory of Democracy. New York: Harper.Google Scholar
Duflo, Esther, Glennerster, Rachel, and Kremer, Michael. 2006. “Using Randomization in Development Economics Research: A Toolkit.” NBER working paper 333.CrossRefGoogle Scholar
Dunning, Thad. 2008. Crude Democracy: Natural Resource Wealth and Political Regimes. New York: Cambridge University Press.CrossRefGoogle Scholar
Easter, Gerald. 2002. “Politics of Revenue Extraction in Post-Communist States: Poland and Russia Compared.” Politics and Society 30 (4): 599–627.CrossRefGoogle Scholar
Evaquarta, Rosa. 2010. “Corrupting Politics.” Inside Indonesia Jan-March.Google Scholar
Fane, George. 2003. “Change and Continuity in Indonesia's New Fiscal Decentralization Arrangements.” Bulletin of Indonesian Economic Studies 39 (1): 159–76.CrossRefGoogle Scholar
Ferraz, Claudio, and Finan, Frederico. 2008. “Exposing Corrupt Politicians: The Effects of Brazil's Publicly Released Audits on Electoral Outcomes.” The Quarterly Journal of Economics 123 (2): 703–45.CrossRefGoogle Scholar
Gadenne, Lucie. 2011. “Tax Me, But Spend Wisely: The Political Economy of Taxes, Evidence from Brazilian Local Governments.” Working paper.Google Scholar
Gervasoni, Carlos. 2010. “A Rentier Theory of Subnational Regimes: Fiscal Federalism, Democracy, and Authoritarianism in the Argentine Provinces.” World Politics 62 (2): 302–40.CrossRefGoogle Scholar
Haber, Stephen, and Menaldo, Victor. 2011. “Do Natural Resources Fuel Authoritarianism? A Reappraisal of the Resource Curse.” American Political Science Review 105: 1.CrossRefGoogle Scholar
Herb, Michael. 2005. “No Representation without Taxation? Rents, Development, and Democracy.” Comparative Politics 37 (3): 297–316.CrossRefGoogle Scholar
Humphreys, Macartan. 2005. “Natural Resources, Conflict and Conflict Resolution: Uncovering the Mechanisms.” Journal of Conflict Resolution 49 (4): 508–37.CrossRefGoogle Scholar
Humphreys, Macartan, and Weinstein, Jeremy. 2010. “Policing Politicians: Citizen Empowerment and Political Accountability in Uganda.” Working paper.Google Scholar
Huntington, Samuel. 1991. The Third Wave: Democratization in the Late Twentieth Century. Norman, OK: University of Oklahoma Press.Google Scholar
Irawaty, Diah. 2011. “Redefining Cultural Practices and Reconstructing a Colonial Legacy: Foundations for Female Household Workers’ Empowerment in Indonesia.” Saarbrucken: VDM Verlag Dr. Muller.Google Scholar
Jensen, Nathan, and Wantchekon, Leonard. 2004. “Resource Wealth and Political Regimes in Africa.” Comparative Political Studies 37 (7): 816–41.CrossRefGoogle Scholar
Kahneman, Daniel, Knetsch, Jack, and Thaler, Richard. 1991. “The Endowment Effect, Loss Aversion and Status Quo Bias.” Journal of Economic Perspectives 5 (1): 193–206.CrossRefGoogle Scholar
Kahneman, Daniel, and Tversky, Amos. 1979. “Prospect Theory: An Analysis of Decision under Risk.” Econometrica 47 (2): 263–91.CrossRefGoogle Scholar
Karl, Terry Lynn. 2007. “Ensuring Fairness: The Case for a Transparent Fiscal Social Contract.” In Escaping the Resource Curse, eds. Humphreys, Macartan, Sachs, Jeffrey and Stiglitz, Joseph. New York: Columbia University Press.Google Scholar
Kolstad, Ivar, and Wiig, Arne. 2008. “Is Transparency the Key to Reducing Corruption in Resource-Rich Countries?” World Development 37: 521–32.CrossRefGoogle Scholar
Levi, Margaret. 1988. Of Rule and Revenue. Berkeley: University of California Press.Google Scholar
Lieberman, Evan S. 2003. Race and Regionalism in the Politics of Taxation in Brazil and South Africa. Cambridge Studies in Comparative Politics. Cambridge, U.K.: Cambridge University Press.CrossRefGoogle Scholar
Mahdavi, Hossein. 1970. “The Pattern and Problems of Economic Development in Rentier States: The Case of Iran.” In Studies in the Economic History of the Middle East, ed. Cook, M.. London: Oxford University Press, 428–67.Google Scholar
Meitzner, Marcus. 2009. “Indonesia's 2009 Elections: Populism, Dynasties and the Consolidation of the Party System.” Lowy Institute for International Policy.Google Scholar
Miller, Gary. 2005. “The Political Evolution of Principal-Agent Models.” Annual Review of Political Science 8: 203–25.CrossRefGoogle Scholar
Moore, Mick. 1998. “Death without Taxes: Democracy, State Capacity, and Aid Dependence in the Fourth World.” In The Democratic Developmental State, eds. Robinson, Mark and White, Gordon. New York: Oxford University Press.Google Scholar
Moore, Mick. 2007. “How Does Taxation Affect the Quality of Governance.” IDS working paper 280.Google Scholar
Moore, Mick, and Rakner, Lisa, eds. 2002. The New Politics of Taxation and Accountability. Vol. 33 of IDS Bulletin. Sussex: Institute of Development Studies.Google Scholar
Morrison, Kevin. 2009. “Oil, Nontax Revenue, and the Redistributional Foundations of Regime Stability.” International Organization 63: 107–38.CrossRefGoogle Scholar
Morton, Rebecca, and Williams, Kenneth. 2010. Experimental Political Science and the Study of Causality. New York: Cambridge University Press.CrossRefGoogle Scholar
Neyman, Jerzy. 1923. “On the Application of Probability Theory to Agricultural Experiments: Essays on Principles.” Statistical Science 5: 463–80.Google Scholar
Niemi, Richard, Stanley, Harold, and Vogel, Ronald. 1995. “State Economies and State Taxes: Do Voters Hold Governors Accountable?” American Journal of Political Science 39 (4): 936–57.CrossRefGoogle Scholar
North, Douglass, and Weingast, Barry. 1989. “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England.” Journal of Economic History XLIX (4): 803–32.CrossRefGoogle Scholar
Olken, Ben. 2007. “Monitoring Corruption: Evidence from a Field Experiment in Indonesia.” Journal of Political Economy 115 (2): 200–49.CrossRefGoogle Scholar
Przeworski, Adam, Stokes, Susan, and Manin, Bernard. 1999. Democracy, Accountability and Representation. Cambridge, U.K.: Cambridge University Press, Introduction.CrossRefGoogle Scholar
Ramsay, Kristopher. 2011. “Revisiting the Resource Curse: Natural Disasters, the Price of Oil, and Democracy.” International Organization 65: 507–29.CrossRefGoogle Scholar
Robinson, James, Torvik, Ragner, and Verdier, Thierry. 2006. “Political Foundations of the Resource Curse.” Journal of Development Economics 79: 447–68.CrossRefGoogle Scholar
Ross, Michael. 2001. “Does Oil Hinder Democracy?” World Politics 53 (3): 325–61.CrossRefGoogle Scholar
Ross, Michael. 2004. “Does Taxation Lead to Representation?” British Journal of Political Science 34: 229–49.CrossRefGoogle Scholar
Ross, Michael. 2012. The Oil Curse: How Petroleum Wealth Shapes the Development of Nations. Princeton: Princeton University Press.CrossRefGoogle Scholar
Sandbu, Martin. 2006. “National Wealth Accounts: A Proposal for Alleviating the Natural Resource Curse.” World Development 34 (7): 1153–70.CrossRefGoogle Scholar
Scott, James C. 1976. The Moral Economy of the Peasant: Rebellion and Subsistence in Southeast Asia. New Haven, CT: Yale University Press.Google Scholar
Smith, Alastair. 2008. “The Perils of Unearned Income.” Journal of Politics 70 (3): 780–93.CrossRefGoogle Scholar
Tilly, Charles. 1992. Coercion, Capital, and European States, A.D. 990-1992. Cambridge, MA: Blackwell.Google Scholar
Torgler, Benno. 2007. Tax Compliance and Tax Morale: A Theoretical and Empirical Analysis. Cheltenham, UK; Northampton, MA: Edward Elgar Publishing Limited.CrossRefGoogle Scholar
Tornell, Aaron, and Lane, Philip. 1999. “The Voracity Effect.” The American Economic Review 89 (1): 22–46.CrossRefGoogle Scholar
Waterbury, John. 1997. From Social Contracts to Extraction Contracts. In Islam, Democracy, and the State in North Africa, ed. Entelis, John. Bloomington: Indiana University Press, 141–76.Google Scholar
Webber, Carolyn, and Wildavsky, Aaron. 1986. A History of Taxation and Expenditure in the Western World. New York: Simon and Schuster.Google Scholar
World Bank. 2007. Spending for Development: Making the Most of Indonesia's New Opportunities, Indonesia Public Expenditure Review 2007. Technical report.Google Scholar
Supplementary material: PDF

Paler Supplementary Material

Appendices

Download Paler Supplementary Material(PDF)
PDF 16.6 MB
Submit a response

Comments

No Comments have been published for this article.