The Fiscal Contract Up Close: Experimental Evidence from Mexico City

• In Event: The Political Economy of Infrastructure

Abstract

When governments cannot perfectly enforce taxation, they may seek to exchange services for voluntary citizen tax compliance. This fiscal contract requires that tax morale responds to public service provision, and that a higher tax burden leads to an increased citizen engagement with the state. In this paper, we assess one key condition for the emergence of fiscal contracts. We present experimental evidence of the impact of local public infrastructure on tax compliance, leveraging the randomized evaluation of a large public investment experiment and the universe of individual property tax records from Mexico City.

Author

• Francisco Garfias, University of California, San Diego