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State Capacity and Long-Run Economic Performance

Economic Journal, Vol. 126, Issue 590, 2014

46 Pages Posted: 25 Apr 2012 Last revised: 15 Mar 2016

Mark Dincecco

University of Michigan at Ann Arbor

Gabriel Katz

California Institute of Technology - Division of the Humanities and Social Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: April 18, 2014

Abstract

We present new evidence about the long-run relationship between state capacity -- the fiscal and administrative power of states -- and economic performance. Our database is novel and spans 11 European countries and 4 centuries from the Old Regime to World War I. We argue that national governments undertook two political transformations over this period: fiscal centralization and limited government. We find a significant direct relationship between fiscal centralization and economic growth. Furthermore, we find that an increase in the state's capacity to extract greater tax revenues was one mechanism through which both political transformations improved economic performance. Our analysis shows systematic evidence that state capacity is an important determinant of long-run economic growth.

Keywords: political regimes, state capacity, economic performance, European history

JEL Classification: H11, N43, O23, P48

Suggested Citation

Dincecco, Mark and Katz, Gabriel, State Capacity and Long-Run Economic Performance (April 18, 2014). Economic Journal, Vol. 126, Issue 590, 2014. Available at SSRN: https://ssrn.com/abstract=2044578 or http://dx.doi.org/10.2139/ssrn.2044578

Mark Dincecco (Contact Author)

University of Michigan at Ann Arbor ( email )

500 S. State Street

Gabriel Katz

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

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