Comparative Evaluation on Effects of Tax Ratio in GDP and Oil Revenue Ratio in GDP on Democracy

As public welfare rises in global level and societies exhibit tendencies toward civil liberties and other aspects of democracy, Economics scholars tend to search for democracy indices and factors affecting democracy. Following this stream, in this article we seek answering the question: Is democracy -as an efficient political system- secured by taxation or by using revenues from natural resources (in particular, oil)? To answer this question, we use panel data model with data from 100 countries between 2008 and 2011. We then analyze the relationship between tax ratio in GDP and democracy index; and compare it with the relationship between ratio of revenue from natural resource in GDP and democracy index. The results show that in 100 countries the tax ratio in GDP definitely has positive effects and significant relationship with democracy index, and the oil revenue ratio in GDP is negatively related with democracy index in such a way that the higher the oil revenue ratio in GDP is (in the oil-producing countries) the lower the democracy index. Similarly, the higher the tax ratio in GDP is (in the industrialized countries), the higher the democracy index.