Warfare, Fiscal Capacity, and Performance

Dincecco, Mark and Prado, Mauricio (2012): Warfare, Fiscal Capacity, and Performance. Forthcoming in: Journal of Economic Growth

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: pre-modern wars; fiscal capacity; public services; worker productivity
• Subjects: H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth; N - Economic History > N4 - Government, War, Law, International Relations, and Regulation > N40 - General, International, or Comparative

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