Warfare, Fiscal Capacity, and Performance
Journal of Economic Growth, Vol. 17, No. 3
46 Pages Posted: 16 Nov 2009 Last revised: 4 Jan 2013
Date Written: March 13, 2012
We exploit differences in casualties sustained in pre-modern wars to estimate the impact of fiscal capacity on economic performance. In the past, states fought different amounts of external conflicts, of various lengths and magnitudes. To raise the revenues to wage wars, states made fiscal innovations, which persisted and helped to shape current fiscal institutions. Economic historians claim that greater fiscal capacity was the key long-run institutional change brought about by historical conflicts. Using casualties sustained in pre-modern wars to instrument for current fiscal institutions, we estimate substantial impacts of fiscal capacity on GDP per worker. The results are robust to a broad range of specifications, controls, and sub-samples.
Keywords: pre-modern wars, fiscal capacity, public services, worker productivity
JEL Classification: C20, H10, O10, N40
Suggested Citation: Suggested Citation