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PIPE Workshop: Emily Sellars, Yale
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.

We present a dynamic principal-agent model to illustrate this argument and provide empirical support for the theory using subnational panel data on local political institutions in colonial Mexico around the time of a technological innovation that drastically improved the Spanish Crown’s ability to observe local economic production: the introduction of the patio process to refine silver. We show that the transition to direct rule differentially increased in mining districts following this technological innovation and that these areas saw greater investments to improve fiscal legibility over the long term.

(joint work with Francisco Garfias of UCSD)

Emily Sellars is assistant professor, Department of Political Science, Yale University.

DISCUSSANT: Sean Gailmard, UC Berkeley

SPECIAL NOTICE: This event will be live closed captioned, in some instances using AI technologies and may not be fully accurate. It is requested that individuals requiring auxiliary aids such as sign language interpreters and alternative format materials notify Anne Johnson, bedrosian.center@usc.edu, no later than 72 hours prior to event.

Oct 12, 2021 12:00 PM in Pacific Time (US and Canada)

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