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State Capacity and Economic Development: A Network Approach

Listed author(s):
  • Daron Acemoglu
  • Camilo García-Jimeno
  • James A. Robinson

We study the direct and spillover effects of local state capacity in Colombia. We model the determination of state capacity as a network game between municipalities and the national government. We estimate this model exploiting the municipality network and the roots of local state capacity related to the presence of the colonial state and royal roads. Our estimates indicate that local state capacity decisions are strategic complements. Spillover effects are sizable, accounting for about 50 percent of the quantitative impact of an expansion in local state capacity, but network effects driven by equilibrium responses of other municipalities are much larger. (JEL D85, H41, H77, O17, O18)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 105 (2015)
Issue (Month): 8 (August)
Pages: 2364-2409

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Handle: RePEc:aea:aecrev:v:105:y:2015:i:8:p:2364-2409
Note: DOI: 10.1257/aer.20140044
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  1. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 531-542.
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  8. Acemoglu, Daron & García-Jimeno, Camilo & Robinson, James A., 2012. "Finding Eldorado: Slavery and long-run development in Colombia," Journal of Comparative Economics, Elsevier, vol. 40(4), pages 534-564.
  9. Miriam Bruhn & Francisco A. Gallego, 2012. "Good, Bad, and Ugly Colonial Activities: Do They Matter for Economic Development?," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 433-461, May.
  10. Sanghamitra Bandyopadhyay & Elliott Green, 2016. "Precolonial Political Centralization and Contemporary Development in Uganda," Economic Development and Cultural Change, University of Chicago Press, vol. 64(3), pages 471-508.
  11. Daron Acemoglu & Davide Ticchi & Andrea Vindigni, 2011. "Emergence And Persistence Of Inefficient States," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 177-208, 04.
  12. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
  13. Gennaioli, Nicola & Voth, Hans-Joachim, 2011. "State Capacity and Military Conflict," CEPR Discussion Papers 8699, C.E.P.R. Discussion Papers.
  14. Roberto Junguito & Hernán Rincón, 2004. "La Política Fiscal en el Siglo XX en Colombia," Borradores de Economia 318, Banco de la Republica de Colombia.
  15. Osafo-Kwaako, Philip & Robinson, James A., 2013. "Political centralization in pre-colonial Africa," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 6-21.
  16. Rauch, James E. & Evans, Peter B., 2000. "Bureaucratic structure and bureaucratic performance in less developed countries," Journal of Public Economics, Elsevier, vol. 75(1), pages 49-71, January.
  17. Jaime Jaramillo U. & Adolfo Meisel R. & Miguel Urrutia, 1997. "Continuities and Discontinuities in the Fiscal and Monetary Institutions of New Granada 1783-1850," BORRADORES DE ECONOMIA 002197, BANCO DE LA REPÚBLICA.
  18. Nicola Gennaioli & Ilia Rainer, 2007. "The modern impact of precolonial centralization in Africa," Journal of Economic Growth, Springer, vol. 12(3), pages 185-234, September.
  19. Dincecco, Mark & Katz, Gabriel, 2012. "State Capacity and Long-Run Performance," MPRA Paper 38299, University Library of Munich, Germany.
  20. Ryo Nakajima, 2007. "Measuring Peer Effects on Youth Smoking Behaviour," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 897-935.
  21. Daron Acemoglu & Melissa Dell, 2010. "Productivity Differences between and within Countries," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 169-188, January.
  22. Giorgio Topa, 2001. "Social Interactions, Local Spillovers and Unemployment," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 261-295.
  23. Rafael Di Tella & Ernesto Schargrodsky, 2004. "Do Police Reduce Crime? Estimates Using the Allocation of Police Forces After a Terrorist Attack," American Economic Review, American Economic Association, vol. 94(1), pages 115-133, March.
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  25. Ruben Durante & Emilio Gutierrez, 2013. "Fighting Crime with a Little Help from my Friends: Party Affiliation, Inter‐jurisdictional Cooperation and Crime in Mexico," Sciences Po publications 17, Sciences Po.
  26. David Stromberg, 2008. "How the Electoral College Influences Campaigns and Policy: The Probability of Being Florida," American Economic Review, American Economic Association, vol. 98(3), pages 769-807, June.
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