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Rebuilding the Social Compact: Urban Service Delivery and Property Taxes in Pakistan

The summary to this paper states:

This impact evaluation investigates whether strengthening the link between local taxation and

urban services can revitalize the social compact between citizen and state. A significant

challenge to the provision of local public services in developing economies is the inability to

raise adequate resources, especially through local taxation. In many countries, the social

compact, whereby citizens agree to pay taxes to fund their desired services, is broken. A low

willingness to pay taxes leads to low revenue collection, and prevents adequate service

provision, which in turn reduces willingness to pay and can even lead to citizen disengagement

from the state. We investigate whether strengthening the link between local collections and

urban services can increase citizens’ willingness to pay for services, improve service delivery,

and enhance local politics. We test this in major urban centers in Punjab, Pakistan via several

interventions - including eliciting citizen preferences for specific services when taxes are

collected, earmarking revenue for specific services, and enabling local politicians - that credibly

strengthen the link between tax collection and urban service provision. This paper presents the

experimental design and reports preliminary impacts on tax payments. On the positive side we

find that the project succeeded in eliciting citizen preferences and delivering services against

them, thereby changing the relationship between tax collectors and citizens. However, we find

that despite successful delivery of services and finding (small) treatment effects on being in an

intervention, many citizens are unaware of being in a special scheme or of having received

greater local goods. Not surprisingly, we therefore find muted effects on attitudes towards the

state or increased tax payments. We address this issue by focusing on raising awareness in an

ongoing round of service delivery so that we can examine whether doing so will lead to

improved attitudes towards to state and greater tax payment.

A copy of the paper can be found via the link below:

Khan-et-al-Final-Report-August-2022.pdf (theigc.org)