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Weak states and steady states: the dynamics of fiscal capacity

Besley, Timothy, Ilzetzki, Ethan and Persson, Torsten (2013) Weak states and steady states: the dynamics of fiscal capacity. American Economic Journal: Macroeconomics, 5 (4). pp. 205-235. ISSN 1945-7707

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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 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.

Item Type: Article
Official URL: http://www.aeaweb.org/aej-macro/index.php
Additional Information: © 2013 American Economic Association
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HJ Public Finance
Journal of Economic Literature Classification System: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E60 - General
Sets: Departments > Economics
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 22 Feb 2013 15:22
URL: http://eprints.lse.ac.uk/46813/

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