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State Capacity, Reciprocity, and the Social Contract

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  • Timothy Besley

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.

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  • Timothy Besley, 2020. "State Capacity, Reciprocity, and the Social Contract," Econometrica, Econometric Society, vol. 88(4), pages 1307-1335, July.
    • Handle: RePEc:wly:emetrp:v:88:y:2020:i:4:p:1307-1335
    DOI: 10.3982/ECTA16863
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