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.
Khan, Adnan Qadir, Asim Ijaz Khwaja, Benjamin Olken, and Mahvish Shaukat. "Rebuilding the Social Compact: Urban Service Delivery and Property Taxes in Pakistan." International Growth Center Report, August 2022.