DP13968 State Capacity, Reciprocity, and the Social Contract

Author(s): Timothy J. Besley
Publication Date: August 2019
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Programme Areas: Public Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13968

This paper explores the role of civic culture in expanding fiscal capacity by developing a model based on reciprocal obligations; citizens pay their taxes and the state provides public goods. Civic culture evolves over time according to the relative payoff of civic-minded and materialist citizens. A strong civic culture manifests itself as high tax revenues sustained by high levels of voluntary tax compliance and provision of public goods. This captures the idea of government as a reciprocal social contract between the state and its citizens. The paper highlights the role of political institutions and common interests in the emergence civic culture.