Paper #1294

Title:

State capacity and military conflict

Authors:

Nicola Gennaioli and Joachim Voth

Date:

November 2011 (Revised: October 2013)

Abstract:

In 1500, Europe was composed of hundreds of statelets and principalities, with weak central authority, no monopoly over the legitimate use of violence, and overlapping jurisdictions. By 1800, only a handful of powerful, centralized nation states remained. We build a model that explains both the emergence of capable states and growing divergence between European powers. We argue that the impact of war was crucial for state building, and depended on: i) the importance of financial resources for military success, and ii) a country's initial level of domestic political fragmentation. We emphasize the role of the "Military Revolution", which raised the cost of war. Initially, this caused more cohesive states to invest in state capacity, while more divided states rationally dropped out of the competition, causing divergence between European states. As the cost of war escalates further, all remaining states engaged in a race to the top, resulting in greater state building.

Keywords:

state capacity, war, military revolution, taxation, political economy

JEL codes:

H10, H20, H56, H60, N43, O10

Area of Research:

Economic and Business History / Macroeconomics and International Economics

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