Historical determinants of state capacity

Abstract

High state capacity is associated with a specific type of state: modern fiscal and bureaucratic state. This study argues that modern fiscal state first emerged in Europe, and later diffused around the world. Early statehood experience between 0-1500 (state history) and colonization shaped the patterns of this diffusion. In order to understand the roles of these variables, this study tests the impact of state history, colonization, and their interaction, on current state capacity, relying on a cross country dataset and IV models. The results show that colonization is negatively associated with current state capacity for countries that had short state history before 1500. Additionally, for countries that were not colonized, having a long state history before 1500 is associated with a weak state today. These findings suggest that the adoption of innovations associated with modern state is hindered in colonized countries with short state history and non-colonized countries with long state history.