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State Capacity and Long-Run Performance

Dincecco, Mark and Katz, Gabriel (2012): State Capacity and Long-Run Performance.

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Abstract

We examine the long-term links between state capacity and economic performance. Our database is novel and spans 11 countries and 4 centuries in Europe, the birthplace of modern economic growth. A dynamic simultaneous equation panel model indicates that the performance effects of states with modern extractive and productive capabilities are significant, large, and robust to a broad range of specifications, controls, and sub-samples. We find that the establishment of an effective state increased per capita GDP by 7 percent over a half-century and by 11 percent over a full century.

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