Formalizing the Relationship between Citizen and State: Experiments from Africa

Session Submission Type: Full Paper Panel

Session Description

One of the leading constraints to economic development in poor countries is weak state capacity. State capacity can promote economic development through better contract and property rights enforcement as well as the improved provision of public goods that both increase human capital and increase market productivity. Practically, increasing state capacity involves formalizing the relationship between the state and its citizens in places where the social contract is only weakly or unevenly implemented. But little is known about how initially weak states can make marginal improvements in the rates of citizen compliance with formal regulations. Theories posit several key mechanisms: increasing the legibility of citizens to the state, or the state’s informational and statistical capacity; increasing the citizen’s access to information about the state processes; increasing the enforcement capacity of the state; and increasing citizen incentives to enter into compliance through improved benefits. But when and where is each of these explanations most likely to drive state capacity building?

While these theories all find empirical support in the literature, the comparative explanatory value of each is unknown. Part of the challenge arises from the fact that state-building and formalization are slow-moving processes that are accompanied by other forms of political and economic development, so isolating causal mechanisms is difficult. The four papers on this panel represent new and important work to address this challenge: large field experimental projects that seek to manipulate one aspect of the formalization process to start generating answers to these larger questions. Each is set in a different sub-Saharan African country, which all share the features of being a relatively weak state with a high level of informality with respect to taxation and registration with the state.

Balan, Bergeron, Tourek, and Weigel study the role of financial and transaction costs in acquiring a property title in the D.R. Congo. Okunogbe also studies property taxes and registration, but this time in Liberia, asking the question of whether increasing property owners’ expectations of legibility and/or enforcement is most likely to result in voluntary compliance. The latter two studies move to another important source of government revenue: taxes from market vendors. In Malawi, Martin and Seim compare the relative effects of stimulating voluntary compliance and increasing enforcement capacity on the rate of tax compliance. Also among market vendors, Gottlieb, Lebas, Magat and Obikili study the role of the intermediary between the state and the citizen in increasing compliance.

Robust findings from the experimental designs featured in this panel will generate an important contribution to our understanding of how citizens are induced to comply with legibility and tax requirements, thereby increasing the capacity of the state.

Sub Unit

• DIVISION 51: Experimental Research

Individual Presentations

• Land and Legibility: Evidence from an Urban Land Titling RCT in Congo - Pablo Balan, Harvard University; Augustin Bergeron; Gabriel Tourek; Jonathan Weigel

• Becoming Legible to the State: Impact on Tax Compliance in Liberia - Oyebola Okunogbe, World Bank Research Group

• Marketing Taxation? Evidence on Enforcement and Bargaining in Malawian Markets - Lucy E. S. Martin, University of North Carolina, Chapel Hill; Brigitte Seim, University of North Carolina-Chapel Hill

• Formalization, Tax Appeals, and Social Intermediaries in Lagos, Nigeria - Adrienne LeBas, American University; Jessica Gottlieb, Texas A&M University; Janica Magat, Texas A&M University; Nonso Yves Obikili, Economic Research Southern Africa

Chair

• Jessica Gottlieb Texas A&M University

Discussants

• Laura B. Paler University of Pittsburgh

• Jeremy Bowles Harvard University