TY  - JOUR
AU  - Besley,Timothy
AU  - Persson,Torsten
TI  - The Origins of State Capacity: Property Rights, Taxation, and Politics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13028
PY  - 2007
Y2  - April 2007
UR  - http://www.nber.org/papers/w13028
L1  - http://www.nber.org/papers/w13028.pdf
N1  - Author contact info:
Timothy J. Besley
Department of Economics
London School of Economics
Houghton Street
London  WC2A 2AE  ENGLAND
E-Mail: T.Besley@lse.ac.uk

Torsten Persson
Torsten and Ragnar Soderberg Chair in Economic Sci
Institute for International Economic Studies
Stockholm University
SE-106 91 Stockholm
SWEDEN
Tel: +46 8 163066
Fax: +46 8 6747801
E-Mail: Torsten.Persson@iies.su.se
AB  - 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.
ER  -