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 this 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, in turn further reducing willingness to pay and even leading 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. They will test this hypothesis in major urban centers in Punjab, Pakistan via pilot interventions–including eliciting citizen preferences for specific services when taxes are collected, earmarking revenue for specific services and providing matching grants–credibly strengthening the link between tax collection and urban service provision. While alleviating public finance challenges, outcomes also will likely address citizen demand, collective action and broader political economy constraints.