State Capacity and Military Conflict

47 Pages Posted: 18 Nov 2011 Last revised: 18 Oct 2014

Nicola Gennaioli

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society; Centre for Economic Policy Research (CEPR)

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Date Written: November 16, 2011

Abstract

Powerful, centralized states controlling a large share of national income only begin to appear in Europe after 1500. We build a model that explains their emergence in response to the increasing importance of money for military success. When fiscal resources are not crucial for winning wars, the threat of external conflict stifles state building. As finance becomes critical, internally cohesive states invest in state capacity while divided states rationally drop out of the competition, causing divergence. We emphasize the role of the “Military Revolution”, a sequence of technological innovations that transformed armed conflict. Using data from 374 battles, we investigate empirically both the importance of money for military success and patterns of state building in early modern Europe. The evidence is consistent with the predictions of our model.

Keywords: state capacity, war, military revolution, taxation, political economy

JEL Classification: H10, H20, H56, H60, N43, O10

Suggested Citation

Gennaioli, Nicola and Voth, Hans-Joachim, State Capacity and Military Conflict (November 16, 2011). Available at SSRN: https://ssrn.com/abstract=1961619 or http://dx.doi.org/10.2139/ssrn.1961619

Nicola Gennaioli

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Hans-Joachim Voth (Contact Author)

University of Zurich - UBS International Center of Economics in Society ( email )

Raemistrasse 71
Zuerich, 8006
Switzerland

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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