Universalization and the origins of fiscal capacity

Identifier:  imarina:9597397

Handle: https://hdl.handle.net/20.500.11797/imarina9597397

Authors:  Muñoz-Sobrado, Esteban

Abstract:
This paper proposes a model of tax compliance and fiscal capacity in which citizens partially internalize the consequences of concealment by imagining a world in which a share of the population acted similarly, linking their compliance decisions to the perceived value of public spending. A selfish elite chooses between public goods and private rents, taking compliance as given. In equilibrium, citizens' moral internalization expands the feasible tax base and induces elites to allocate resources toward provision rather than appropriation. When the value of public spending is uncertain, morality enables credible reform: high-value elites can signal their type through provision, prompting citizens to increase compliance and raising fiscal capacity within the same period. The analysis thus identifies a moral channel through which states may escape low-capacity traps even under weak enforcement.