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(PDF) On the Tax Morale Effects of Irregular Presidential Transitions PDF | We study how irregular presidential transitions affect tax morale. Our analysis leverages administrative tax records and a... | Find, read and cite all the research you need on ResearchGate

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Overall, the results suggest that irregular presidential removals can weaken citizen–state reciprocity and reduce fiscal compliance, with meaningful consequences for local government revenues.

We further provide evidence against alternative explanations based on:

* reduced enforcement capacity
* reduced household income or consumption
* generalized institutional distrust unrelated to the episode

To address concerns about protest disruption, we also re-estimate the main specifications excluding districts most exposed to protest-related violence.

The estimates remain similar in magnitude.

To distinguish irregular transitions from ideological turnover, we replicate the design for Peru’s most comparable routine left-to-right transition (Humala → Kuczynski).

We find no comparable decline in tax revenues.

A key feature of the evidence is timing. The effects are strongest precisely during the period of heightened protest activity and state repression, consistent with a deterioration in state legitimacy among Castillo supporters.

We then examine potential mechanisms. The decline in tax revenues coincides with:

* persistent drops in presidential approval
* short-run reductions in trust in the police
* increases in reported racial discrimination following repression of protests

This result is economically meaningful: it suggests that democratic disruptions can generate immediate fiscal consequences by weakening compliance and voluntary cooperation with the state.

Main finding

Following the impeachment, tax revenues in pro-Castillo districts declined by up to 16% in the subsequent quarter.

The decline is concentrated in local taxes, especially property taxes.

We use administrative tax records and a difference-in-differences design exploiting geographic variation in electoral support for Castillo, comparing districts where he won the first round to districts where he did not.

Irregular transitions—such as impeachments—have become a central feature of modern democratic erosion. Yet their economic consequences remain understudied, particularly in the context of public finance.

🧵 New preprint with @CabraAcela 🧵

Do irregular presidential transitions undermine tax compliance?

In a new paper, we study presidential removals and document significant effects on tax collection in regions that supported the ousted president.