DP15138 Local Elites as State Capacity: How City Chiefs Use Local Information to Increase Tax Compliance in the D.R. Congo
Historical states with low capacity often delegated tax collection to local elites, despite the risk of mismanagement. Could this strategy raise revenues without undermining government legitimacy in fragile states today? We provide evidence from a randomized policy experiment assigning neighborhoods of a Congolese city — spanning 45,162 properties — to tax collection by state agents or by city chiefs. Chief collection raised property tax compliance by 3.3 percentage points, increasing revenues by 43%. Although chiefs collected more bribes, we find no evidence of mismanagement or backlash on other margins. Results from a hybrid treatment arm in which state agents consulted with chiefs before collection suggest that chief collectors achieved higher compliance by using local information to more efficiently target households with high payment propensities, rather than by being more effective at persuading households to pay conditional on having visited them.