The Words That Keep People Apart. Official Language, Accountability and Fiscal Capacity

This paper empirically evaluates the impact of accountability on fiscal capacity. We maintain that if the average citizen speaks a language different from the central government and the elite, she will find it difficult/impossible to hold the government to account. As a result, this will negatively affect fiscal capacity. We adopt an instrumental variable approach using, as an instrument, the measure of how far the official language differs from ordinary language. The first stage results suggest that this instrument is strong and reliable and is negatively correlated with our measure of accountability in line with the hypothesis. The results in the second stage support our hypothesis. The results are robust to plausible exogeneity tests and different specifications.