Panel abstract: How can we measure the distance between the political elite and the people? We argue that a greater distance between the official language and every-day language creates a cultural gap between the people and the elite. This, in turn, plays a major role in government insulation and, therefore, its accountability. The cultural gap is crucial since, through accountability, it may impact on states’ fiscal capacity. Our key innovation is twofold. Firstly, we delve into the study of language as a dividing factor between the elite and the people. Previous studies focused on language as an element that measures cultural assimilation between groups or states, all entities on the same institutional and social level (Lazear, 1995). Secondly, we highlight an original and causal channel through which culture influences states’ institution. Using a cross-section of 146 countries, we propose an instrumental variable approach. We investigate the impact of accountability on fiscal capacity using as an instrument the measure of average linguistic distance for the official language (ADOL), proposed by Laitin & Ramachandran (2016). This measure conveys the idea of vertical separation between the elite and the average citizens. Results show the existence of a negative and significant relationship between linguistic distance and accountability. Furthermore, they also confirm the positive impact of accountability on fiscal capacity. Robustness and sensitivity checks underpin our main findings.
