State Capacity, Reciprocity, and the Social Contract
Econometrica · 2020 · Volume 88 · Issue 4
Abstract
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 of civic culture.
Keywords
Reciprocity, fiscal capacity, cultural dynamics
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