Flatliners: Ideology and Rational Learning in the Diffusion of the Flat Tax

substantive policy dimension, each party was placed on a scale describing its position,
using the Laver-Hunt (1992) metric of 1 to 20, with 1 generally corresponding the “left”
position. To account for the impact of ideology on tax policy changes, we used Economic
(Spending v. Taxes) policy dimension, with the following two extremes: (1) Promotes
raising taxes to increase public services, and (20) Promotes cutting public services to cut
taxes.

For governmental ideology, we use data from Benoit and Laver for 2000s, and Huber
and Inglehart (1995) for the 1990s. In case of coalitions, we used the average coalition
score, weighted by seats. We standardized the 10-point scale in the latter study make
it be equivalent with the 20-point scale of Benoit and Laver. Though it would be ideal
to have the same ideology data for all years, we checked for robustness by matching the
economic left-right positions of parties from Benoit and Laver with those of Huber and
Inglehart, the positions were within three points difference at most.²⁶ For consistency, we
also included in some of the estimations indicators of party families (whether governing
parties were liberal or conservative).²⁷ The problem with using party families in the
context of Eastern Europe is that economic liberals are not necessarily social liberals.²⁸

In keeping with the above hypotheses, we model diffusion in a few different ways.
First, we measure regional competition for mobile investment, by calculating a country’s
FDI as a share of that in its region (divided into Central Europe, Eastern Europe, the
order to adjudicate the substantive validity of the results, expert knowledge can provide key insights and
serve as benchmarks that give some systematic sense of the validity of alternative measures. (Benoit &
Laver, forthcoming; Chapter 3 discusses this in detail)

²⁶Basinger and Hallenberg (2004) used Laver and Hunt (1992) to estimate party ideology for 1980-97,
thus they estimated party positions in 1980 using data collected in early 1990s. We think it preferable to
use estimators collected for respective decades, instead of applying Benoit and Lavers data retrospectively.

²⁷ Chapel Hill Party Dataset 2002, taken from Gary Marks’s website. The estimation is omitted in
this paper, please, contact authors if interested.

²⁸Indeed, in the post-communist countries, unlike in the West, positioning on social liberalism is
typically orthogonal to positioning on economic policy positioning.See Whitefield and Evans (1994), who
found correlations between social and economic indices of just 0.33. See also Kitschelt (1999), p. 67.

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