Academic Events

Topic:

Time&Date:

10:00 am - 11:30 pm, March 27, 2025 (Thursday)

Venue

Room 202, Teaching Complex D Building

Speaker:

Marco Gonzalez-Navarro

University of California, Berkeley 

Many developing countries face a challenge whereby low tax compliance limits governments’ ability to provide public goods, while at the same time, inadequate public good provision discourages tax compliance. We examine whether a prominent local public infrastructure program can disrupt this vicious cycle through a randomized trial of first time street pavement projects in Acayucan, Mexico. Among 56 eligible street projects in poor neighborhoods, 28 were randomly selected for pavement. We analyze administrative property tax records to determine if tax compliance increased as a result. To guide our empirical analysis, we develop a theoretical model incorporating two key mechanisms: updating of beliefs about government expenditure efficiency and direct benefits from infrastructure improvements that elicit a reciprocity to comply. We find that property owners adjacent to newly paved streets (capturing private benefit effects) increase tax compliance by 4.7 percentage points (ITT) to 7.7 percentage points (LATE), corresponding to a 5.5–9.0% rise over baseline compliance rates. In addition, property owners exposed to pavement projects in their trajectory to downtown also show increased compliance (consistent with belief updating), with a one standard deviation increase in exposure raising compliance by 2.3-3.8 percentage points. In line with model predictions, we find that treatment effects are more pronounced among individuals with lower initial government satisfaction. Our findings indicate the delivery of public goods can enhance tax compliance by delivering direct benefits as well as improving perceptions of government efficiency. A back of the envelope calculation suggests that belief updating from citizens observing the pavement projects generates twice as much tax revenue as reciprocity effects from direct beneficiaries lining newly paved streets.

Biography:

Marco Gonzalez-Navarro is the George Pardee Jr. Family Chair of International Sustainable Development Associate Professor at UC-Berkeley.  His research focuses on issues in Development Economics, Urban Economics and Political Economy. He received his Ph.D. in Economics from Princeton University. He currently serves as co-editor at the Journal of Development Economics, associate editor at Regional Science and Urban Economics, and as member of the editorial board at Journal of Urban Economics. He is a J-PAL, CEGA and BREAD affiliate.