ZHANG Jinghua:Tax and the Quality of Governance: Cross-country Empirical Tests

Abstract：Taxation affects the quality of governance.Using the cross-country data of both developed and developing economies, this paper tests the relationship between tax revenue and changes in indicators of the quality of governance.We find that taxation improves the quality of governance and those taxes loaded most by citizens directly are extremely important in improving governance.Our results are robust to different estimation methodologies, to variations in the country sample, and to controlling for the influence of variables that have been identified as affecting the quality of governance.Tax has become the important ligament for the interaction of country and society, and can improve political accountability and the quality of governance.Policies aimed at mobilizing tax revenues may be justified based on the greater accountability of government.It is easier to achieve good governance for the country which highly depends on tax.It has great implications for the modernization of the governance system and governance ability in China.

Key words： Taxation   Quality of Governance   State Capacity

source:Finance & Trade Economics ,No.11,2014