David Lagakos, an Associate Professor of Economics, has always been fascinated with Sub-Saharan Africa. As a child in Boston, he watched as his father, a researcher at Harvard University, traveled to Sub-Saharan Africa to study the AIDS epidemic. When the International Growth Center had an opening for an Economic Development Specialist in Ghana, he jumped on the opportunity.
The International Growth Centre (IGC) connects researchers across the world with policymakers in developing countries to promote inclusive and sustainable growth through path breaking research. Lagakos, a professor in the economics department, began working with the organization in 2015 when he got involved due to his interest in collaboration between policymakers and economists who work in developing countries.
Lagakos has now spent more than five years doing research with the IGC in Ghana to assess the ability of the governments to collect taxes and use them productively for public works projects such as paving roads, improving electricity, and more. His primary research goal has been to figure out why the local governments in Ghana were collecting so little in tax revenue, and how they could utilize taxes more efficiently going forward.
Lagakos, alongside other economic researchers and other members of the IGC launched a research survey in which they spoke to every local government in the country including thousands of officials, members of Parliament, bureaucrats, and community leaders.
“We were amazed to find that most households never got a bill. The governments were not serving anybody,” he said. “The police don’t come when called in Ghana, and there is hardly any provision of public goods. In principle, the local governments should be a good way of helping citizens and collecting property taxes since they are more centralized. However, local governments were inefficient in doing so.”
There were many reasons that researchers contributed to the lack of success in obtaining tax revenue — such as the lack of any databases or records of the property owners in the area, no established credit or any established legal claim to the properties, and the fact that most African countries lack street names or property addresses.
After the initial study, it became clear that the local governments in Ghana were in over their heads. Although they had been making efforts, it would take big investments to revolutionize the tax collection system. Between 2017 and 2018, a principal private sector firm began to develop technology for use in Ghana that took satellite images and digitized them. The images showed home roofs and overall shapes of the houses, in which collectors can estimate the square footage of a house. The satellite also provided a precise GPS coordinate, which allowed tax collectors to accurately find the properties and homeowners.
In early 2020, the IGC team and Lagakos conducted another study with their newfound research and technology where they randomized the use of the new technology in a test. Sixty people worked with the traditional billing system and another sixty were given the new satellite and GPS technology. Not only did the new technology double the tax collection revenue, but collectors also found it easier to find and follow up with property owners. The study concluded that the tax collectors who were using tablets were much better at learning who was afraid to pay taxes and who was afraid of the local government. Since the successful implementation of the technology, the President and Vice President of Ghana have now made implementing the systems a national priority.
As the Covid-19 pandemic impacted the United States in March 2020, work had to be halted on the project due to travel and lockdown restrictions which kept Lagakos in Boston and unable to continue his work at the IGC.
Since the pandemic, he said, the work has become much harder. “I tried to start new research via zoom but that is not the same as building new relationships with government officials in person,” he said. “Maintaining existing relationships with policymakers was easier but after a while they forgot about you and move on to their next project (or retire or get replaced).”
Lagakos has not been able to return to Ghana due to the pandemic and travel restrictions. However, he is preparing to return to Ghana in December, where he will continue his work and begin thinking about the next steps of the project. “We’re hoping to have this scaled out to other areas. This research was done in a richer area (upper-middle-class area for Africa), but we wonder if this will work in poorer areas.” he stated.
Although the implementation was a success, some issues arose from the progress being made. Local districts are not happy about the advancements because it leaves a “paper trail” or documentation of monetary payments. “In Ghana, there is a lot of embezzlement. It can be hard to know exactly where corruption happens. Our research going forward will be about how the paper trail can be stronger and take away opportunities to embezzle.” he stated.
Lagakos and other researchers are looking to incorporate tactics from nearby countries such as Kenya, where they use a form of mobile payment named Safaricom to avoid “leakage”. But even after a corruption investigation, the money collected from tax revenue can still be spent unwisely. “ We’re trying to think about ways to work with citizen groups such as the Home Owners Association (HOA) and religious organizations to focus on problems in the community, and to collaborate between community groups and the local governments.” Lagakos elaborated. The hope is that this will hold government officials more accountable and they will be more communicative about where the money is going in public works projects.