Weak States and Steady States: The Dynamics of Fiscal Capacity

Timothy Besley, Ethan Ilzetzki and Torsten Persson ()

American Economic Journal: Macroeconomics, 2013, vol. 5, issue 4, 205-35

Abstract: 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.

JEL-codes: E23 E62 H23 H26 H41 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/mac.5.4.205
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Citations: View citations in EconPapers (43)

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