Working Paper: CEPR ID: DP9307
Authors: Timothy J. Besley; Torsten Persson
Abstract: The central question in taxation and development is: "how does a government go from raising around 10% of GDP in taxes to raising around 40%"? This paper looks at the economic and political forces that shape the way that fiscal capacity is created and sustained. As well as reviewing the literature and evidence, it builds an overarching framework to help structure thinking on the topic.
Keywords: state capacity; taxation
JEL Codes: H11; H20; O17; O43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic development (O29) | fiscal capacity (E62) |
| political institutions (D02) | fiscal capacity (E62) |
| investments in fiscal capacity (H54) | tax collection efficiency (H26) |
| political incentives (D72) | tax system evolution (H26) |
| stronger political institutions (P16) | ability to raise taxes (H29) |
| investments in state structures (H54) | capacity to enforce tax laws (H26) |
| political stability (P26) | fiscal capacity (E62) |