The Origins of the State: Technology, Cooperation and Institutions
29 Pages Posted: 25 Jun 2020
Date Written: June 2, 2020
Despite the vast evidence on the economic relevance of the state's institutional capacity to provide public goods and incentivize trade and investment, we lack an integrated and empirically sound theory of its origins. To help fill this gap, we study the first forms of stable state institutions observed in Bronze Age Mesopotamia. Our analysis suggests that the mix of adverse geographic conditions and unforeseen innovations pushed groups favored by old technologies to grant stronger political and property rights to those endowed with new and complementary skills. These reforms convinced the nonelites that a sufficient part of the returns on joint investment would have been shared via public spending and, thus, to both cooperate and accumulate a culture of cooperation. Different from the alternative theories of state formation, we highlight that: 1) elites and nonelites endogenously arise because of technological shocks shaping organizational skills, warfare and trade and/or investment activities; 2) heterogeneity in group-specific skills is a key determinant of reforms towards stronger nonelites' political and property rights; 3) military, merchant, and especially, religious ranks eased reforms towards stronger nonelites' rights and the spread of a culture of cooperation; 4) access to violence is not a key engine of institutional evolution.
Keywords: Geography; Time-Inconsistency; State-building; Culture of Cooperation.
JEL Classification: O13, H10, D23
Suggested Citation: Suggested Citation