Comparative politics and environmental taxation

In this paper, we take a step towards understanding the role of democratic institutions on the level of pollution taxation. Persson et al. (J. Polit. Economy 108 (2000) 1121) argue that presidential–congressional regimes set lower taxes than parliamentary regimes. This conclusion results from the checks and balances built into the former, and the higher degree of legislative cohesion in the latter. We test this prediction on gasoline and diesel prices using the method of propensity score matching along with data from 86 democratic countries. The empirical evidence is consonant with the theory: we find that ceteris paribus the average price of super gasoline is $0.14–$0.20 less per liter in presidential–congressional systems; the average price of diesel gasoline is $0.11–$0.14 less per liter.