Fiscal Legibility and State Development: Theory and Evidence from Colonial Mexico

We examine how fiscal legibility, the ability of a central government to observe local economic conditions for the purposes of taxation, shapes political centralization. When a ruler is unable to observe economic conditions, it can be preferable to grant autonomy to local intermediaries in charge of tax collection to encourage better performance.

As a ruler’s ability to observe local conditions improves, so does his ability to accurately monitor and sanction underperforming intermediaries. This enables the ruler to tighten control over tax collection, retain more revenue, and establish a more direct state presence. It also encourages investment in further enhancing fiscal legibility.

(joint work with Francisco Garfias of UCSD)

Emily Sellars, assistant professor, Department of Political Science. Sellars’ research interests are at the intersection of comparative political economy, development economics, and economic history. Her dissertation, “Essays on Emigration and Politics,” received the 2017 Mancur Olson Award for the best dissertation in political economy defended in the previous two years.

Discussant:  Sean Gailmard, UC Berkeley

*Political institutions & political economony