A New Measure of State Capacity, 1789-2018

Abstract

This paper contributes to the literature on state capacity by creating a measure with far more comprehensive data coverage across time than has previously been possible. It uses data from the Varieties of Democracy dataset on fiscal capacity, a state’s control over its territory, the rule of law, and the provision of public goods used to support markets. Like previous literature, it demonstrates the historical prevalence of warfare to predict state capacity. It also links state capacity to economic growth. Unlike previous literature, it is able to test these findings using panel data. We are also able to quantitatively assess the position conjectured by Acemoglu and Robinson (2019) regarding the importance of balance between the power of society and the power of the state. These applications are meant to illustrate the ways in which the measure can improve upon the rigor of existing literature on state capacity.

Keywords: State Capacity, Fiscal Capacity, Legal Capacity, Rule of Law, Varieties of Democracy, Institutional Development, The Narrow Corridor

JEL Classification: H11, O43, H20, P14