State Capacity and Economic Development: Causal Mechanism or Correlative Filter?

32 Pages Posted: 3 Dec 2018

See all articles by Vincent Geloso

Vincent Geloso

Bates College

Alexander William Salter

Texas Tech University - Rawls College of Business; American Institute for Economic Research

Date Written: December 1, 2018

Abstract

In this paper, we explore why there are no examples of societies with low state capacity and high economic development. We argue that such an outcome is unlikely because of the nature of investments in state capacity. Societies that become rich in the absence of a strong state invite predation by societies that develop such states. Thus societies invest in state capacity, in part, to plunder other societies’ wealth. Those investments are a form of rent-seeking. Potentially preyed-upon societies are forced to invest in state capacity in turn so as to deter potential attackers. This entails that as soon as a rent seeker enters the game, the likelihood of a low-capacity, high-development society surviving falls. This explains the historical lack of such societies. We thus interpret state capacity not as a causal condition for widespread economic prosperity, but a survivability condition for enjoying this prosperity.

Keywords: State Capacity, Economic Development, Public Goods

JEL Classification: B53; D72; L51

Suggested Citation

Geloso, Vincent and Salter, Alexander William, State Capacity and Economic Development: Causal Mechanism or Correlative Filter? (December 1, 2018). Available at SSRN: https://ssrn.com/abstract=3294086 or http://dx.doi.org/10.2139/ssrn.3294086

Vincent Geloso (Contact Author)

Bates College ( email )

Department of Economics
Lewiston, ME
United States

Alexander William Salter

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

HOME PAGE: http://awsalter.com

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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