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Disparate geography and the origins of tax capacity

  • Pablo Beramendi
  • Melissa RogersEmail author
Article

Abstract

We establish a conceptual and empirical link between the geographic distribution of economic endowments within a nation and long-run fiscal capacity. Economic geography informs elites’ incentives to facilitate large-scale central taxing bureaucracies. Sectoral economic advantage also provides them with leverage to transform these state-building incentives into policy and stable institutional equilibria. We argue that unequal economic endowments across the geography of a nation exacerbate distributive tensions. Political disagreement over the size and the scope of the state hinder centralized investments in state capacity to collect taxes. Using detailed sub-national data and indicators of geographic distribution, we demonstrate global patterns of sub-national economic geography, and how these patterns are related to sub-national variation in economic productivity. We show that divergence in sub-national economies varies across the world and is related to predictable differences in the size of the fiscal state.

Keywords

Economic geography Taxation Spatial inequality Political economy State capacity 

JEL Classification

R12 H2 H73 N40 N90 

Notes

Acknowledgments

The authors thank Axel Dreher, Guy Whitten, Florian Hollenbach, Didac Queralt, Carles Boix, and participants in the Texas A&M University “Taxation, Revenue, and Fiscal Capacity” Conference (March 2017) for helpful comments on earlier versions of this article. Pablo Beramendi acknowledges support by the National Research Foundation of Korea (NRF-2017S1A3A2066657. The authors thank Kristoffer Wikstrom for top-quality research assistance.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Duke UniversityDurhamUSA
  2. 2.Claremont Graduate UniversityClaremontUSA

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