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

A significant challenge to the provision of local public services–water, sanitation, waste removal, etc.–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 government services that are then credibly and transparently delivered, 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 even leads to citizen disengagement from the state. In this project, researchers will investigate whether strengthening the link between local collections and urban services can increase citizens’ willingness to pay for services, improve service delivery, and ultimately revitalize the social compact. Researchers will 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 providing matching grants– that credibly strengthen the link between tax collection and urban service provision. In addition to alleviating public finance challenges, outcomes will also likely address citizen demand, collective action, and broader political economy constraints.