Tax contracts and elections

Hans Gersbach, Maik Schneider

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4 Citations (SciVal)
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In this paper we examine the impact of tax contracts as a novel institution on elections, policies, and welfare. We consider a political game in which three parties compete to form the government and voters may behave strategically. Parties have policy preferences about the level of public-good provision and benefit from perks when in office. A government raises taxes for both purposes. We show that tax contracts yield moderate policies and lead to lower perks by avoiding the formation of grand coalitions in order to win government. Moreover, in polarized societies they unambiguously improve the welfare of the median voter.
Original languageEnglish
Pages (from-to)1461-1479
Number of pages18
JournalEuropean Economic Review
Issue number7
Publication statusPublished - 2012


  • Political Contracts
  • Elections
  • Government Formation
  • Political Economy
  • Tax promise

ASJC Scopus subject areas

  • Economics and Econometrics


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