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Warfare, Fiscal Capacity, and Performance

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  • Dincecco, Mark
  • Prado, Mauricio

Abstract

We exploit differences in casualties sustained in pre-modern wars to estimate the impact of fiscal capacity on economic performance. In the past, states fought different amounts of external conflicts, of various lengths and magnitudes. To raise the revenues to wage wars, states made fiscal innovations, which persisted and helped to shape current fiscal institutions. Economic historians claim that greater fiscal capacity was the key long-run institutional change brought about by historical conflicts. Using casualties sustained in pre-modern wars to instrument for current fiscal institutions, we estimate substantial impacts of fiscal capacity on GDP per worker. The results are robust to a broad range of specifications, controls, and sub-samples.

Suggested Citation

  • Dincecco, Mark & Prado, Mauricio, 2012. "Warfare, Fiscal Capacity, and Performance," MPRA Paper 39264, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:39264
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    Keywords

    pre-modern wars; fiscal capacity; public services; worker productivity;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative

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