Taxation and Spending in Latin America

Abstract

The battle over state redistribution, and the means to pay for welfare transfers, lies at the heart of contemporary political economy. This has been one of the central plinths of political science research on the advanced industrial democracies, and we now have a good understanding of the dynamics of spending and taxation in these countries, rooted in the power of the left and labor movements, together with the embedded liberal compromise. These explanations, however, struggle to explain tax and spending outcomes across Latin America. This is largely because the pressures of globalization, rather than embedded liberalism, drive efficiency concerns in Latin America; across the region, the left often behaves in unanticipated ways, and redistribution comes in many forms. These effects are compounded by the power of business interests across the region and the heterogeneity of voter preferences when it comes to spending and taxation. More research is needed on both the macro and micro level dynamics of taxation and social spending in Latin America.