Weak States and Steady States: The Dynamics of Fiscal Capacity
2013 (English)In: American Economic Journal: Macroeconomics, ISSN 1945-7707, Vol. 5, no 4, 205-235 p.Article in journal (Refereed) Published
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.
Economics and Business
IdentifiersURN: urn:nbn:se:su:diva-95750DOI: 10.1257/mac.5.4.205ISI: 000325424300007OAI: oai:DiVA.org:su-95750DiVA: diva2:662266