Avoiding the aid curse? Taxation and development in Japan

Research output: Chapter in Book/Report/Conference proceedingChapter

1 Scopus citations

Abstract

Just as failed laboratory experiments can be as informative as successful ones – pointing out flaws with the assumptions that led us to formulate the experiment and warning others away from the path – failed policies always teach us something about the world. One of the Shoup Mission’s lasting contributions is to show us some things that can and cannot be done to engineer economic development. Carl Shoup wanted to give Japan a state-of-the-art tax system. Although many parts of that system broke down or were swept aside, some remained intact, and Japan went on to become the first non-Western nation to reach Western levels of development, pulling South Korea and the “little tigers” in its economic wake. The role that the Japanese tax system – both pre- and post-Shoup – played in Japan’s sudden rise can offer us some small but important insights into economic development. One of these is on how to avoid what scholars have come to call the “aid curse”. Countries with abundant natural resources are able to avoid extending democratic rights to their citizens, a phenomenon labeled the “natural resources curse”. Oil, gas, diamonds, timber, and narcotics undermine democracy by fostering insurgencies, by making countries vulnerable to trade shocks, and by limiting female participation in the labor force and in politics. Recently, some scholars have begun to wonder whether foreign aid flows are analogous to natural resources in their developmental effects – whether countries that receive foreign aid can use it to avoid extending democratic rights to their citizens, in what they call “the aid curse”. Djankov, Montalvo, and Reynal-Querol make the strongest version of this argument, pointing out that foreign aid is a larger proportion of the budget in many countries than natural resources.

Original languageEnglish (US)
Title of host publicationThe Political Economy of Transnational Tax Reform
Subtitle of host publicationThe Shoup Mission to Japan in Historical Context
PublisherCambridge University Press
Pages289-305
Number of pages17
ISBN (Electronic)9781139519427
ISBN (Print)9781107033160
DOIs
StatePublished - Jan 1 2010

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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