The Origins of State Capacity: Property Rights, Taxation, and Politics

Torsten Persson () and Timothy Besley

No 6370, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens. However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today. This paper develops a framework where "policy choices", regulation of markets and tax rates, are constrained by "economic institutions", which in turn reflect past investments in legal and fiscal state capacity. We study the economic and political determinants of these investments. The analysis shows that common interest public goods, such as fighting external wars, as well as political stability and inclusive political institutions, are conducive to building state capacity. Preliminary empirical evidence based on cross-country data find a number of correlations consistent with the theory.

Keywords: State capacity; Development; Property rights (search for similar items in EconPapers)
JEL-codes: D70 E60 H10 K40 O10 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-dev, nep-law, nep-pbe, nep-pol and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Related works:
Journal Article: The Origins of State Capacity: Property Rights, Taxation, and Politics (2009)
Working Paper: The origins of state capacity: property rights, taxation and politics (2009)
Working Paper: The Origins of State Capacity: Property Rights, Taxation, and Politics (2007)
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