Keeping the Public Purse: An Experiment in Windfalls, Taxes, and the Incentives to Restrain Government

Abstract

It is widely believed that rents from windfall revenue undermine accountability. An enduring explanation is that windfalls free leaders from the need to tax, producing a quiescent population. Yet, there is little direct evidence of how windfalls and taxes affect citizen political action. I use novel revenue and information experiments to examine whether and why windfalls (compared to taxes) affect how citizens participate in politics. The experiments were embedded in a public awareness campaign conducted with 1,863 citizens in Indonesia. The results—from an original survey and postcard campaign—indicate that the tax treatment increased monitoring and anti-incumbent political action. Yet, when given spending information, citizens in the windfall treatment cared just as much about misused revenue as those in the tax treatment. The findings have important implications for understanding not only how revenue affects citizen political behavior but also how people acquire and process information on government spending.

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