The Consequences of Collective Action: An Incomplete-Contracts Approach

47 Pages Posted: 20 Jun 2005

Date Written: December 31, 2005

Abstract

Public policy may be determined as much by what cannot be agreed to by politicians and organized interests as by what can. Focusing on the inability of organized groups to credibly promise that their members will fully report revenues to tax authorities, I develop an incomplete-contracts lobbying model which shows that the provision of collective goods may be influenced by the anticipated tax compliance of economic sectors as well as by the organization of interests. Data from a survey of firms in Eastern Europe and the former Soviet Union are broadly supportive of the theory: the ability of firms to hide revenues from tax authorities rivals conventional collective-action variables in explaining variation in collective-goods provision, but only in that part of the postcommunist world where differences in revenue hiding across sectors are especially large.

Keywords: collective action, incomplete contracts, taxability, postcommunism

JEL Classification: D72, D78, E62, H32, H41, P26

Suggested Citation

Gehlbach, Scott, The Consequences of Collective Action: An Incomplete-Contracts Approach (December 31, 2005). Available at SSRN: https://ssrn.com/abstract=746132 or http://dx.doi.org/10.2139/ssrn.746132

Scott Gehlbach (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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