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State Capacity, Conflict and Development

  • Timothy Besley
  • Torsten Persson

We report on an on-going project, which asks a number of questions relevant to thestudy of state capacity. What are the main economic and political determinants ofthe state's capacity to raise revenue and support private markets? How do risks ofviolent conflict affect the incentives to invest in state building? Does it matterwhether conflicts are external or internal to the state? When are large statesassociated with higher income levels and growth rates than small states? Whatrelations should we expect between resource rents, civil wars and economicdevelopment? The paper is organized into three main sections: 1. The origins of statecapacity, 2. Sate capacity and the genius of taxation, and 3. State capacity and thestrategy of conflict. Each of these begins with a specific motivation. A simple modelis formulated to analyze the determinants of state capacity in the first section, andmodified to address the new issues that arise in subsequent sections. The theoreticalresults are summarized in a number of propositions. We discuss the implications ofthe theory, comment on its relation to existing literature, and briefly mention someempiric applications.

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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Economic Organisation and Public Policy Discussion Papers Series with number 010.

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Date of creation: Jun 2009
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Handle: RePEc:cep:stieop:010
Contact details of provider: Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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  10. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-78, June.
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  14. Marco Pagano & Paolo F. Volpin, 2005. "The Political Economy of Corporate Governance," American Economic Review, American Economic Association, vol. 95(4), pages 1005-1030, September.
  15. Timothy Besley & Torsten Persson, 2008. "Wars and State Capacity," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 522-530, 04-05.
  16. Besley, Timothy J. & Persson, Torsten, 2008. "The Incidence of Civil War: Theory and Evidence," CEPR Discussion Papers 7101, C.E.P.R. Discussion Papers.
  17. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
  18. Collier, Paul & Hoeffler, Anke, 2000. "Greed and grievance in civil war," Policy Research Working Paper Series 2355, The World Bank.
  19. Timothy Besley & Torsten Persson, 2009. "Repression or Civil War?," American Economic Review, American Economic Association, vol. 99(2), pages 292-97, May.
  20. Daron Acemoglu, 2006. "Modeling Inefficient Institutions," NBER Working Papers 11940, National Bureau of Economic Research, Inc.
  21. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
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