New Research Reveals How Taxation Drives Government Accountability

3 November 2023 10:53

New Research Reveals How Taxation Drives Government Accountability

Ingrid Hoem Sjursen's paper, "Accountability and taxation: Experimental evidence," published in the esteemed Journal of Economic Behavior & Organization, explores the intricate relationship between taxation and government transparency.

In this paper published in the Journal of Economic Behavior & Organization, Ingrid Hoem Sjursen, an affiliated researcher with FAIR, investigates the link between taxation and government accountability. Her research provides evidence supporting the Rentier State Hypothesis, demonstrating that taxation significantly increases citizens' demand for accountability. By dissecting the underlying mechanisms behind this phenomenon, the study highlights the role of ownership, loss aversion, fairness norms, and the salience of fairness considerations in shaping citizens' behavior. This research offers a perspective on how taxation can drive political accountability and presents valuable insights for policymakers seeking to enhance transparency in governance.

Link to paper

Title: Accountability and taxation: Experimental evidence

Abstract: The Rentier State Hypothesis states that taxation promotes government accountability. The argument is that citizens demand more accountability for spending of tax revenue than for spending of windfall revenue (e.g., natural resource revenue and aid). This paper presents causal evidence from a between-subject experiment that tests the effect of taxation on demand for accountability. To investigate the underlying mechanisms of the effect, the design focuses on two main features that distinguish tax from windfall revenue: Tax revenue is produced by citizens' work and has been in their possession before it is collected as tax. The main finding is that taxation causes a higher demand for accountability when both features of taxation are present, consistent with the Rentier State Hypothesis. The paper sheds light on the political economy of government revenues, and contributes to our understanding of how features of the tax system shape behavior.