Technology and Tax Capacity: Evidence from Local Governments in Ghana
This paper studies the role of technology in improving tax capacity in the developing world, focusing on local property taxation in Ghana. We randomize the use of a new technology designed to help revenue collectors locate property owners to deliver tax bills. We find that the technology increases bill deliveries by 27 percent and, surprisingly, increases tax collections by 103 percent. To reconcile these experimental findings, we build and estimate a dynamic time-use model in which revenue collectors respond to the new technology by shifting their allocation of time toward learning about households’ propensity to pay and subsequently collecting from those with the highest payment propensity. The model’s predictions are consistent with experimental evidence on collector time allocations, knowledge, and collection strategies. Our theory highlights how technology designed to solve one problem can help overcome other challenges once behavioral changes by users of the technology are taken into account.
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