Fiscal Capacity and State Fragility
This article discusses issues that arise in building an effective fiscal state and relates this to debates about causes and consequences of state fragility. It argues that the lack of capacity to raise revenue is symptomatic of a wider range of issues that lie at the heart of state fragility including a weak private sector, a lack of legitimacy and poorly functioning administrative structures. Building the capacity to mobilize revenues requires building a social contract based on a culture of voluntary compliance in addition to strengthening more tangible aspects of the state. This has far-reaching consequences policies that aim to strengthen fiscal capacity in the context of fragility.
The article was published as a chapter in the volume Macroeconomic Policy in Fragile States which was edited by Ralph Chami, Raphael Espinoza and Peter J. Montiel. It was planned as an introduction for practitioners to the specific background of fragile states and contains conceptual articles and empirical studies around the topic from the point view of experienced IMF staff and the involved academics. For me one of the most fascinating aspects in this project was the preparative workshop which illustrated very clearly to me the gap that still lies between applied academic work and the policy issues in the field. It is this gap we need to work on and fill.
The book is available from Oxford University Press. A previous version of our chapter is available here.