Spillovers in State Capacity Building: Evidence from the Digitization of Land Records in Pakistan

Abstract

Digitization reforms have been hailed as an effective way to strengthen state capacity. However, digitization can also disrupt the organization of bureaucracies. Using a unique administrative dataset on agricultural taxation and surveys of local bureaucrats from Punjab, Pakistan, we show that digitization reforms can have unintended consequences for state capacity. We exploit the staggered roll-out of the digitization of land records in Punjab to show that digitization had a negative effect on tax collection. The fall in taxes was not due to a decrease in the tax base. Instead, digitization affected the bureaucracy's capacity to collect taxes. The paper thus sheds light on the importance of understanding state capacity development from an organisational perspective.