TY  - RPRT
Y1  - 2018/02//
EP  - 44
A1  - Belmonte, Alessandro
A1  - Teobaldelli, Désirée
A1  - Ticchi, Davide
UR  - http://eprints.imtlucca.it/3894/
PB  - IMT School for Advanced Studies Lucca
TI  - Tax Morale, Fiscal Capacity, and Wars
SN  - 2279-6894
AV  - public
M1  - imt_eic_working_paper
N2  - 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.
ID  - eprints3894
KW  - Keywords: tax morale
KW  -  state capacity
KW  -  external threat
KW  -  civil wars
KW  -  dynamic complementarity
KW  - 
culture and institutions.  -  JEL Classification: P16
KW  -  H11
KW  -  H26
KW  -  H41
ER  -