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Weak States and Steady States: The Dynamics of Fiscal Capacity
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
2013 (English)In: American Economic Journal: Macroeconomics, ISSN 1945-7707, Vol. 5, no 4, 205-235 p.Article in journal (Refereed) Published
Abstract [en]

Investments in fiscal capacity-economic institutions for tax compliance-are an important feature of economic development. This paper develops a dynamic model to study the evolution of fiscal capacity over time. We contrast a social planner's investment path with politically feasible paths. Three types of states emerge in the long run: a common-interest state where public resources are devoted to public goods, a redistributive state where additional fiscal capacity is used for transfers, and a weak state with no transfers and a low level of public goods provision. We also present some preliminary evidence consistent with the theory.

Place, publisher, year, edition, pages
2013. Vol. 5, no 4, 205-235 p.
National Category
Economics and Business
URN: urn:nbn:se:su:diva-95750DOI: 10.1257/mac.5.4.205ISI: 000325424300007OAI: diva2:662266


Available from: 2013-11-06 Created: 2013-11-04 Last updated: 2013-11-06Bibliographically approved

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Persson, Torsten
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