The proposed analysis: taxation and stability policy with a sample of 60 countries around the world during the period 2002 to 2008, helping to make distinctions between the political instability experienced but maintained high taxation, and those states with political stability but with a low taxation. The few variables that are used in the model, and its reduction to a two-way relationship is one of its merits, when compared with other models used in similar studies. The model also contains a simple explanation for a complex problem: measuring the taxing power and its relations with political stability, and vice versa, to measure political stability based on taxation. The model results are not linear, but rather its variables: (Tax, PS, GE, FC and GDP) are involved in the system with a relative weight. In any case shows that the bijective relationship between taxation and political stability depends on the institutional framework and the type of government. Political stability can be a good predictor of tax stability, although not the only key factor. It is possible to suggest on the basis of these results that the political and institutional stability determines the conditions of economic risk and civil war, divisions between parties and violent conflict, so typical in countries with political instability.
Literature rewiev
Paul Collier and Anke Hoeffler (2009a, 2009b, 2004) have presented arguments to quantitatively assess the causes of political instability and civil wars. Its central hypothesis is that economic opportunities are the main causes of civil wars.Democracies established in dangerous conditions for the resumption of armed conflict, as stressed also James Fearon and David Laitin (2003), in some cases politic...
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...me, the model also suggests that the tax reform process can often contain political instability. Previous research has shown that transitions to democracy often go through intermediate regimes (Collier, Pzevorski). This work has shown that can happen a variety of political instability, partial democracies with tax systems of low or high incomes. In a majority of the unstable political regimes of low tax risk is evident. Taxation, as noted, may have indirect relationships with political instability in complex regimens. In any case, when institutions are subordinated to radical struggles between factions or political parties, the tax is at risk of being godless by taxpayers or the sensors are installed in revenue, ready to devour the budget. Then, the corrections made to the fiscal policy effects are not always assertive on the general policies of public spending.
Ojede, A., & Yamarik, S. (2012). Tax policy and state economic growth: The long-run and short-run of it. Economic Letters, 116(2), 161-165. http://dx.doi.org/10.1016/j.econlet.2012.02.023
War models are essential in demonstrating correlations between theory-associated variables and the risk of war. The econometric model built by Collier and Hoeffler, for instance, provides a fair war measurement by demonstrating opportunity as a source of conflict. It includes predominant variables such as Primary commodity exports, GDP per capita, GDP per growth and population. In most cases, low GDP per capita and slow growth rate increase the risk of war because they provided a low opportunity cost for rebellion. This corresponds to the phenomenon in which many countries that underwent civil war over the period 1960-1999 were poor developing countries such as Congo, Sudan and Zimbabwe. Yugoslavia likewise underwent an economic breakdown in 1989, shortly before the outbreak of wars in 1992. A poor overall economy generates social tensions, leading to war. Meanwhile, a high dependency on Pr...
Empirical literature examining the determinants of inflation has mostly viewed it as a monetary phenomenon. This viewpoint basically stems from Milton Friedman’s famous dictum that inflation is always and everywhere a monetary phenomenon. However, the conjecture of Friedman has recently come under attack. In fact, there appears to be virtually no correlation between money growth and inflation since the early 1980s. This leads to evolution of the argument known as Fiscal Theory of Price Level (FTPL). To capture the nonmonetary aspects of inflation, a number of economists investigate the main political, institutional and economic determinants of inflation across countries and over time. For instance, Aisen and Veiga (2006) conclude that political instability leads to higher inflation. Their study reveals that an additional government crises and a cabinet change which are used as proxy for measuring political instability raise inflation rate by 16.1% and 9.1% respectively. In another study, Aisen and Veiga (2008) extend their work to further analyze the effect of political instability, social polarization and the quality of institutions on inflation volatility. They argue that politically unstable and socially polarized countries with weak institutions are more exposed to political shocks that result in discontinuous monetary and fiscal policies which in turn result in higher inflation volatility. The intuition is that rising inflation instability creates frictions on market which reduces economic efficiency and causes the prevailing price in the economy to deviate from the price which would otherwise have been determined in presence of stable price level. They also provide evidence that greater independence of the Central Bank leads...
Peacebuilding only became prominent in the Post-Cold War period and is the newest in the measures for achieving peace and security (Busumtwi-Sam, Module 7). It rests on the premise that democratization, liberalization and pacification are idea for long term peace and security (Tziarras,2012,3). This premise is considered the liberal peace or democratic peace theory. However, liberal democratic polity and a market oriented economy have the potential to impede the consolidation of peace. These two practices paradoxically encourage societal completion as a means of achieving political stability and economic prosperity (Paris,1997,57). Policies related to market liberalization lends itself to sever inequality, which generates violent political polarization. War shattered states are expected to effectively complete a transformation that took several centuries in the oldest European states all while emerging from the tumultuous situation of a civil war (Paris,1997,78). It is unrealistic to expect war shattered states to become democracies and market economies in such a short time frame. There are examples throughout history that showcase the short coming of liberal internationalism as a strategy of peacebuilding. For example, in Rwanda and Angola political liberalization contributed to the resurgence of violence and in Mozambique, El Salavdor, and Nicaragua, the effects of
In most cases, the cost of war does not play a role in explaining the democratic peace, only in explaining why democracies are unlikely to engage in fewer wars in general. While nationalism can be used to override concerns over the cost of war and mobilize popular support, it does not work against nations which share similar principles and in fact works against the predilection towards war. In part, this may help redeem the public constraint component of the structural explanation of the democratic peace. In particular, when combined with the assumption that the democratic peace is valid only in the post-World War II regions of the Americas and Western Europe, this explanation becomes more plausible.
Most democratic nations in the modern world have affluent economies, such as the United States, Spain, and England. Democratic leaders, who have been elected by the general population, have an interest to invest in the greater public and incentivize citizens to contribute to the financial system. Keeping the citizenry content through pecuniary means keeps a democratic leader in his position, as a leader is accountable and elected for and by the people. Autocratic rulers, however, only intend to please the select individuals who keep them in power, but not the overall population. Thus, democracies are prone to investing in the public and sustaining a profitable fiscal system. At best, engaging in war for these well off democracies would risk losing a large amount of wealth in building arms and actually conducting battle. At worst, citizens and leaders in a democracy could lose all of their wealth and proceed to suffer from a stagnant economy. Furthermore, a larger economy with more money to spend results in increased security and militarization, which is a defining characteristic of most modern democracies. With superior surveillance and military force, democracies have a greater tendency to cause largescale destruction. This capability also serves as a deterrent to other democracies which might have an interest
Debating which constitutional form of government best serves democratic nations is discussed by political scientist Juan Linz in his essay “The Perils of Presidentialism”. Linz compares parliamentary systems with presidential systems as they govern democracies. As the title of Linz’s essay implies, he sees Presidentialism as potentially dangerous. Linz points out the flaws as presidentialism as he sees them and sites rigidity of fixed terms, the zero-sum game and political legitimacy coupled with lack of incentive to form alliances as issues to support his theory that the parliamentary system is superior to presidentialism.
As a result, political repression and political laziness often run rampant. Under these circumstances, the incumbent party is almost always re-elected because of the appeasive payoffs that they are able to finance from resource wealth (Wantchekon, 1999, p. 20).... ... middle of paper ... ... Norman, C. N. (2008).
Johnson, C. (2008). Partitioning to peace: Sovereignty, demography, and ethnic civil wars. International Security, 32(4), 140-170.
Almost every state on Earth desires peace, so why do countries go to war so often? Between World War I and World War II alone, there were an estimated 81 million casualties (Primary Megadeaths). Each state has different values and desires and many are willing to do whatever it takes to ensure those values remain in their state as well as spread to others. War results in a failure of states to successfully bargain with one another. The most common reason for wars to occur is territorial control. Of the 155 wars in the past three centuries, 83 of them dealt with territory (Holsti). Adding more territory will often add more wealth to the state. One way it can do that is by providing goods, resources, or industries that a state needs, such as oil or minerals. Iran and Iraq fought a war from 1980-1988 partially because Iraq sought to take control of Iran’s southern oil fields, according to World Politics. Military strategy can also play a role in why states seek new territories. Finally, states can be interested in territory for ethnic, cultural, or historical reasons. A prime ex...
The IMF (2014). Fiscal Policy and Income Inequality. International Monetary Fund Policy Paper. Available on: http://www.imf.org/external/np/pp/eng/2014/012314.pdf. [Accessed on 21st of April 2014].
After analyzing the data and the theory, we have provided our conclusion weather tax cut is better for the stimulation of growth or Government spending is? This report explains the big macroeconomic debates of the present times. It seeks to explore the debate within fiscal policy itself between tax cuts and government spending. We have tried to explain the argument through some theories and through some data collected from Indian econ...
The famous literature on principles of taxation was embodied in Adams Smith “Canons of taxation”. Since then, economies have adopted (and adapted where necessary) these basic principles for what is regarded as the most important tool of fiscal policy.
Furthermore, political instability causes uncertainty and, at its most extreme, complete economic breakdown. Take Sudan in Africa thi...
Governments also impose tax to control market failure. In an economy, there are negative externalities, or a consequence from a particular economic activity...