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

2009/08/01 by Timothy Besley, Torsten Persson · 19 citations
Economics, Econometrics and Finance · Social Sciences · #Corruption and Economic Development #Culture, Economy, and Development Studies #Economic system #Economics #Fiscal Policy and Economic Growth #Fiscal capacity #Law #Market economy #Microeconomics #Point (geometry) #Political economy #Political science #Politics #Property (philosophy) #Property rights #Public economics #Public good #State (computer science)

paper · pdf · doi:10.1257/aer.99.4.1218

published in American Economic Review 99(4), 1218-1244 (American Economic Association)

openalex publication_date 2009/08/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/15

Abstract

Economists generally assume that the state has sufficient institutional capacity to support markets and levy taxes. This paper develops a framework where “policy choices” in market regulation and taxation are constrained by past investments in legal and fiscal capacity. It studies the economic and political determinants of such investments, demonstrating that legal and fiscal capacity are typically complements. The results show that, among other things, common interest public goods, such as fighting external wars, as well as political stability and inclusive political institutions, are conducive to building state capacity. Some correlations in cross-country data are consistent with the theory. (JEL D72, E62, H11, H20, P14)

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