relation: http://eprints.imtlucca.it/3894/
title: Tax Morale, Fiscal Capacity, and Wars
creator: Belmonte, Alessandro
creator: Teobaldelli, Désirée
creator: Ticchi, Davide
subject: HB Economic Theory
description: This paper studies how mobilization for war motivates citizens to contribute to their  own community and therefore help forming tax morale in a constituency. We derive a  theoretical model to investigate government's decision to expand tax revenues from alternative  sources, namely changing the country's culture of tax compliance or expanding  fiscal capacity. Despite the two are initially substitute, we show how in equilibrium dynamic  complementarity arises. Our mechanism exploits exogenous variation in the cost of  tax morale formation, induced by an expected war (either internal or external) that makes  easier for the government to mobilize the constituency. We motivate our theory through a  novel cross-country analysis that uses information on war frequency, tax morale, and fiscal  capacity. We additionally discuss some historical cases consistent with our mechanism.
publisher: IMT School for Advanced Studies Lucca
date: 2018-02
type: Working Paper
type: NonPeerReviewed
format: application/pdf
language: en
rights: cc_by_nd
identifier: http://eprints.imtlucca.it/3894/1/EIC_WP_3_2018.pdf
identifier:   Belmonte, Alessandro and Teobaldelli, Désirée and Ticchi, Davide  Tax Morale, Fiscal Capacity, and Wars.  EIC working paper series  #3/2018    IMT School for Advanced Studies Lucca    ISSN 2279-6894.