State Capacity and the Post Office: Evidence from 19th Century Quebec

Abstract

The theory of state capacity predicts that states with powerful abilities—as long as they are constrained—can promote economic growth if these abilities are used to support market development. Some scholars, especially in economic history, argue that post offices are a proxy for
government effectiveness and state capacity (Chong et al., 2014; Acemoglu et al., 2016; Rogowski et al., 2017; Jensen and Ramey, 2019), because a well-functioning communication network helps markets operate. Our aim here is modest: is this relationship generalizable? We answer this question by using agricultural data from nineteenth century Quebec which was the poorest area of North America (and which stood to gain the most from the expansion of postal services). We use a difference-in-difference method to estimate the effect of gaining, or losing, a post office on the value of agricultural output per acre in 1831, 1851, and 1861. We find no treatment effect, implying that post offices had no relationship with agricultural productivity.

Keywords: State Capacity, Economic History, Post Office, Canada, Quebec

JEL Classification: H11, N41, N51