Building fiscal capacity requires that the state obtain compliance with its tax demands, a struggle for weak states that lack enforcement capacity. One potential option for leaders of weak states is to establish political legitimacy and thereby foster voluntary compliance. In this study, we report results from a phone-based participatory budgeting policy experiment in Sierra Leone that attempted to build legitimacy and fiscal capacity by inviting public participation in local policy decision making. In phone-based town halls, participants shared policy preferences with neighbors and local politicians and then voted for local public services that were subsequently implemented. We find that the intervention increased participants’ perceptions of government legitimacy. However, against influential models of tax compliance, we find a robust null effects on tax compliance behavior. In exploratory analyses we find that preexisting attitudes towards paying taxes and partisan affiliation strongly condition tax compliance behavior and attitudes towards paying taxes.

To achieve better tax compliance, the Russian government required small firms to use online cash registers (OCRs) for business-to-consumer transactions from 2017. The main goal of the OCR policy in Russia is better tax compliance. For firms, the installation of the OCR leads to an increase in fixed costs. This might push firms to switch to the shadow market (partially or fully), to exit the market, to report more costs and less profits, or to combine several strategies. Using the Difference-in-Difference technique, on the firm level, I estimate the effects of the OCR policy on reported profits, profits tax, and firms' exit decisions. Exogenous variation for causal inference is possible thanks to different years of policy implementation (2017, 2018, 2019). I find that firms tend to exit the market after OCR policy implementation and report less profits, and slightly higher wages, and there is no effect for VAT and profit tax.

This paper examines Spain's fiscal capacity at the provincial level between 1904 and 1934, utilizing a unique dataset on provincial tax series. Three tax indicators are constructed, focusing on real total tax revenues, real tax burdens per capita, and real tax burdens as a percentage of GDP for the 48 provinces. The study addresses where taxes were paid and how tax indicators evolved in early 20th-century Spain. Results reveal that Madrid and Barcelona led in tax revenues and per capita tax burdens during this period, with increasing concentration in top-contributing provinces. Additionally, tax burdens as a percentage of provincial GDP were generally low nationwide, but relatively higher in Madrid due to a "capital" effect. Decreases in tax burdens suggest Spain had an inelastic tax system and limited fiscal capacity, relying on urbanized provinces for revenue while taxing agrarian provinces less.

This study explores the impact of economic crime, particularly counterfeiting in Italy post the Great Recession (2008-19). Mafia-led counterfeiting, prevalent in Italy, significantly damages authentic brands and worsens regional economic disparities. Using a unique regional dataset, two main effects of counterfeiting are identified: firstly, it reduces unemployment in struggling areas, contributing to short-term economic growth by flooding the market with counterfeit goods. Secondly, it undermines market modernization and growth by violating intellectual property rights of legitimate innovative firms. The interplay of these effects results in a dynamic pattern, initially boosting GDP through the informal economy, but ultimately hindering long-term growth. The study highlights the need for effective policies to curb the short-term positive impact of economic crime and guide Italy towards sustained modernization and reduced crime rates.