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The Rent-Seeking State and Revenue Diversification

Published online by Cambridge University Press:  13 June 2011

John A. C. Conybeare
John A. C. Conybeare
Affiliation:
Columbia University
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Abstract

Economists have only recently begun to characterize the behavior of the state as rentor profit-seeking. One of the ways in which the rent-seeking state may maximize the resources it extracts from taxpayers is through diversification of the tax revenue base. Empirical evidence presented in this paper may help to explain the extent to which countries are able to engage in this form of rent seeking. The highly developed country's ability to diversify its tax base is constrained by the ease of exit of taxable assets from its jurisdiction; with the exception of this limitation, countries with more diversified tax bases collect more revenue relative to national income. This conclusion does not hold, however, for geographic diversification (i.e., federalism). The case is different for developing countries: although they may have a more diversified tax base than developed countries, they are unable to exploit it because of administrative weakness; therefore, rent seeking on the part of the state may be predicted by more conventional factors such as income or trade.

Type
Research Article
Information
World Politics , Volume 35 , Issue 1 , October 1982 , pp. 25 - 42
Copyright
Copyright © Trustees of Princeton University 1982

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References

1 See James M. Buchanan, “Rent Seeking and Profit Seeking,” and Tullock, Gordon, ”Rent Seeking as a Negative Sum Game,” in Buchanan, James M., Tollison, Robert D. and Tullock, Gordon, eds., Toward a Theory of the Rent-Seeking Society (College Station, Texas: Texas A&M Press, 1980), 3–36.Google Scholar

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The 79 developing countries are listed below by area:

South/Central America: Argentina, Barbados, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Equador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, Surinam, Uruguay.

Middle East: Cyprus, Egypt, Israel, Jordan, Syria, Yemen Arab Republic.

Asia/Pacific: Bangladesh, Burma, Fiji, India, Malaysia, Nepal, Papua-New Guinea, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand.

Africa: Benin, Botswana, Burundi, Cameroons, Chad, Congo, Ethiopia, Gambia, Ghana, Kenya, Lesotho, Liberia, Malagasy, Malawi, Mali, Mauritania, Mauritius, Morocco, Niger, Rwanda, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Tunisia, Upper Volta, Zaire, Zambia.

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27 See Cameron (fn.15), 1250–51, for a brief bibliographical survey of the literature that discusses “neomercantilist” reactions to interdependence.

28 Cameron (fn. 15), 1251–53; Krasner (fn. 24), 135; Thorn (fn. 24), 46–47; Hinrichs (fn. 25). 551.

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32 ibid., 41.

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