Premium
Flatliners: Ideology and rational learning in the adoption of the flat tax
Author(s) -
BATURO ALEXANDER,
GRAY JULIA
Publication year - 2009
Publication title -
european journal of political research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.267
H-Index - 95
eISSN - 1475-6765
pISSN - 0304-4130
DOI - 10.1111/j.1475-6765.2008.00830.x
Subject(s) - ideology , emulation , economics , government (linguistics) , public economics , process (computing) , investment (military) , political economy , market economy , economic system , political science , politics , economic growth , law , linguistics , philosophy , computer science , operating system
What factors explain the wave of adoption of the flat tax in Eastern Europe? It is argued in this article that, once the first few successes were underway, governments with liberal outlooks toward taxation adopted the reform through a process of rational learning: an often radically new government will tend to adopt the policy based on successful implementation of its neighbours. The issue of policy diffusion is approached by explicitly modeling the different mechanisms that might underlie the process. Little evidence is found for pure ‘bandwagoning’ in the adoption of the flat tax – the presence of other market‐minded reforms do not predict adoption of the flat tax, and contagion measures do not capture the dynamics of the adoption of the reform. Instead, rational learning, where economically right‐wing governments evaluated the success of the reform (as measured by their ability to attract foreign investment) in the medium term, plays the largest role. Rational emulation in a shorter time period contributes to the probability of adoption as well, as does a change to an economically liberal ideology.