Hellenic Observatory, London School of Economics and Political Science
Abstract
Building on a unique dataset that contains 13 different tax categories of the Greek state over the period 1833-1933, this paper studies the effect of democratisation on the size and the composition of tax revenues. Empirical analysis suggests that the radical reform that enfranchised all adult males in Greece in 1864 did not affect the level of taxation, but did exert a significant impact on its structure. Universal male suffrage was accompanied by an amazing reduction in rural taxes (e.g., taxes on land) and remarkable increases in indirect taxes – mostly in custom and excises duties. These findings clearly indicate that there were political economy motives behind this shift in the implemented fiscal policy. In particular, the Greek governments changed the structure of taxation in order to satisfy the large majority of the electorate, who were peasants and farmers, ensuring a minimum level of social cohesion. Using also a sample of 12 Western European countries over the same period, we show that the phase of economic development induced a differentiated effect of democratisation on the size and the structure of taxation
