Tax Revenue, Democracy and Governance: New Evidence for Selected Developed and Developing Oil-Prone Countries

Hosseini Kondelaji, Mir Hadi; Sadeghi Amroabadi, Behrouz; Mahmoudinia, Davoud

doi:10.22059/ier.2026.409668.1008386

Tax Revenue, Democracy and Governance: New Evidence for Selected Developed and Developing Oil-Prone Countries

Articles in Press

Document Type : Research Paper

Authors

Mir Hadi Hosseini Kondelaji ¹

Behrouz Sadeghi Amroabadi ²

Davoud Mahmoudinia ³

¹ Department of Economics, Faculty of Economics and Administrative Sciences, Arak University, Arak, Iran.

² Department of Economics, Faculty of Business, Athabasca University, Edmonton, Canada; Department of Economics, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran.

³ Department of Economics, Faculty of Economics and Administrative Sciences, Vali-e-Asr University of Rafsanjan, Rafsanjan, Iran.

10.22059/ier.2026.409668.1008386

Abstract

The current study examines the relationship between the level of democracy and tax revenue. It explores the determinants of tax collections, revealing context-dependent interrelations shaped by economic and institutional settings over the period 2006-2022, using panel data from selected developing and developed countries. These relationships are evident in diversified economies, as shown by the Pooled OLS with Driscoll-Kraay Standard Errors and Panel-Corrected Standard Errors, which align with the accountability hypothesis in the literature. However, the oil-dependent countries' model is consistent with the resource curse. Except for the FE-DK method, the results show a positive effect of the democracy index on tax revenues in both developing and developed countries. While the FE-DK method shows a significant negative impact of democracy on tax revenue, especially in oil-producing countries across country income groups, which is consistent with rentier‑state resource‑curse theories. Overall, the findings highlight how institutional quality and economic structure shape the democracy–taxation relationship, offering useful insights for fiscal policy in both resource-rich and diversified economies.

Keywords

Democracy

Oil-Prone countries

Panel-Corrected Standard Errors

Panel Granger causality tests

Tax Revenue

Subjects