Abstract
The idea of welfare state and the role this state should play in economic life is one of the most important problems economic science tried to solve during the last century. What is frequently forgotten is that apart from economic welfare the role of state is influenced by shared cultural values of its population.
It is the population which is to obey economic policy and it is on members of certain culture to create economic policies. The present study attempts to evaluate the role of shared cultural values measured by the cultural indexes in explaining the differences in the tax revenues as percentage of GDP on the cross-sectional data from 42 countries.
The results suggest that the association between the shared cultural values, on one side, and the tax revenues as percentage of GDP, on the other side, is statistically significant. The relationship stays significant when the differences in GDP per capita are controlled for.
The causality of this relation is, however, unclear. There exist cultural reasons suggesting that it is more probable that cultural values are relatively stable over time, and under some historical circumstances may cause the differences in the role of the state measured by tax revenues across countries.
On the other hand, current policies might influence cultural values as well. In any case, it seems to be important to take culture into account when designing optimal economic policies.