State Capacity, Reciprocity, and the Social Contract

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.

Reply to: Comments on “ State Capacity, Reciprocity, and the Social Contract”

“…Bowles () draws attention to the need to study intergenerational dynamics to get a handle on the speed at which cultural change takes place. Figure shows that there is significant cross‐country heterogeneity in attitudes towards tax compliance in the WVS/EVS described in Besley () even after controlling for individual characteristics. There also appear to be stable patterns across generations which can be seen from Figure , which looks at variation across cohorts and countries by looking at those born before 1950 and after 1970 .…”

“…Making the choice of institutions and other aspects of the environment means integrating the framework of this paper into a more dynamic strategic model of decision making. For example, enforcement capacity in Besley () could be made endogenous alongside civic culture.…”

“…Besley () examines just one aspect of why a number of states grew in strength (particularly increased their fiscal capacity) in the 20th century, building on the insights of Levi (). Besley and Persson () had developed a canonical approach to explore the role of economics and politics in building state capacity which neglected the role of civic culture.…”

A Comment on: “State Capacity, Reciprocity, and the Social Contract”by Timothy Besley

“…Tim Besley's Presidential Address in the Econometric Society fits this research strand. Drawing on work with Thorsten Persson, Besley () develops a simple, yet rich, theoretical paradigm that stresses the complementarity between the cohesiveness of state institutions with civicness, modeled as quasi‐voluntary tax compliance, where tax revenues are used to fund public goods. Besley () formalizes ideas found in Levi's () influential historical analysis on the evolution of taxation and statehood, as well as leading political thinkers stressing the role of civic participation and social capital, such as Lipset () and Putnam (), on institutional and economic development.…”

“…As Besley () puts it, one can distinguish between two extreme views of statehood. On the one hand, the Hobbesian approach views the state as means of constraining people's worst atomism in their state of nature , what he coins as “ Warre ”; in turn, citizens place constraints on the state Leviathan (Hobbes ()).…”