State Capacity and Long‐Run Economic Performance

30 Pages Posted: 11 Feb 2016

See all articles by Mark Dincecco

Mark Dincecco

University of Michigan at Ann Arbor

Gabriel Katz

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

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Date Written: February 2016

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 four centuries from the Old Regime to World War I. We argue that national governments undertook two political transformations over this period: fiscal centralisation and limited government. We find a significant direct relationship between fiscal centralisation 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.

Suggested Citation

Dincecco, Mark and Katz, Gabriel, State Capacity and Long‐Run Economic Performance (February 2016). The Economic Journal, Vol. 126, Issue 590, pp. 189-218, 2016, Available at SSRN: https://ssrn.com/abstract=2730937 or http://dx.doi.org/10.1111/ecoj.12161

Mark Dincecco (Contact Author)

University of Michigan at Ann Arbor ( email )

HOME PAGE: http://sites.google.com/umich.edu/dincecco

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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