The origins of state capacity: property rights, taxation and politics

Besley, Timothy ORCID: 0000-0002-8923-6372 and Persson, Torsten (2009) The origins of state capacity: property rights, taxation and politics. American Economic Review, 99 (4). pp. 1218-1244. ISSN 0002-8282

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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.

Item Type:	Article
Official URL:	http://www.aeaweb.org/aer/index.php
Additional Information:	© 2009 The Authors
Divisions:	STICERD
Subjects:	H Social Sciences > HG Finance H Social Sciences > HJ Public Finance J Political Science > JA Political science (General) J Political Science > JF Political institutions (General)
JEL classification:	D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government P - Economic Systems > P1 - Capitalist Systems > P14 - Property Rights
Date Deposited:	30 Mar 2011 15:45
Last Modified:	11 Dec 2024 23:35
URI:	http://eprints.lse.ac.uk/id/eprint/33768

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