Spatial Inequality, Public Good Access, and Support for the Tax State in Mexico

• In Event: Taxation and State Capacity: Insights from the Developing World

Abstract

How does spatial inequality affect people’s attitudes toward taxation? The burgeoning inequality literature in political science has highlighted the importance of contextual factors shaping relationships previously thought to be unconditional. Drawing on the literature on taxation and the substitutability between public and private goods, we study how spatial inequality affects the relationship between public good provision and willingness to pay taxes. We evaluate this relationship relying on original data from a nationally-representative survey fielded in Mexico, one of the countries in Latin America with the lowest fiscal extraction and experiencing the wave of citizen insecurity that has plagued many democracies in the region. We argue that in highly unequal contexts, as in Mexico and the rest of Latin America, the relationship between perceptions of public safety—the quintessential public good provided by governments—and willingness to pay for it is contingent on the availability of private substitutes such as private security companies or gated communities. The availability of private alternatives affects individuals’ commitment to funding public safety through taxes, such that the relationship is negative in areas where private alternatives are available, but positive where citizens have lower access to private security. Unless private alternatives are absent, the greater the public’s concern for public safety, the less worthy of additional resources it deems the state to be. We show that this spatial inequality supports an inverse relationship between willingness and ability-to-pay taxes that turns insecurity and fiscal weakness into a self-enforcing equilibrium.

Authors

• Gustavo A. Flores-Macias, Cornell University

• Mariano Sanchez-Talanquer, El Colegio de México