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Weak states and steady states: the dynamics of fiscal capacity

Besley, Timothy, Ilzetzki, Ethan and Persson, Torsten (2010) Weak states and steady states: the dynamics of fiscal capacity. In: The Political Economy of Economic Development, April 30th - May 1st 2010, Manresa, Spain. (Unpublished)

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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 such investments and their evolution over time. We contrast a social planner’s investment path with paths where political constraints are important. Three types of states emerge in the long run: (1) a common-interest state where public resources are devoted to public goods, (2) a redistributive state where additional fiscal capacity is used for transfers, and (3) a weak state with no transfers and a low level of public goods provision. The paper characterizes the conditions under which each possibility emerges and comparative statics wihin each regime.

Item Type: Conference or Workshop Item (Paper)
Official URL: http://www.crei.cat/
Additional Information: © 2010 The authors
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
Sets: Departments > Economics
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 04 Apr 2011 13:27
URL: http://eprints.lse.ac.uk/33781/

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