Taxation, Developmental State Capacity and Poverty Reduction

There is a general consensus that sustained economic growth is a necessary condition for sustained reduction in poverty (Page, 2005; Ravallion, 1997). Sustained economic growth and structural transformation is necessary for sustained increases in salaried employment, which historically is the main source of increases in the incomes of low-income groups as well as improving the empowerment of women (Sender, 2008). In turn, the construction and consolidation of a state that has the authority and legitimacy to secure property rights over growth-enhancing activities, maintain public order and mobilise resources is a necessary condition for growth. Much of the recent literature on the developmental state examines how successful late developers have intervened to promote growth, but has neglected to identify where the power and legitimacy of a state to enforce and change the rights and institutions, and to extract and mobilise the resources required to sustain development and growth comes from in the first place (Kohli, 1999).