Participation, Legitimacy and Fiscal Capacity in Weak States: Evidence from Participatory Budgeting

Abstract

Does direct democracy enable state capacity building in weak states? We study a participatory budgeting experiment in Sierra Leone in which participants shared policy preferences with neighbors and local politicians and voted for public services that were implemented. The intervention durably increased participants’ perceptions of government legitimacy. Yet impacts on tax compliance were sharply polarized on partisan lines: participation increased compliance among partisan supporters of the local government but reduced it among political opponents, yielding no average effect. These results show that while participatory institutions can strengthen legitimacy, their capacity-building effects may be undermined when participation politicizes compliance.