Skip to main content
Springer Nature Link
Log in

Warfare, fiscal capacity, and performance

  • Published:
Journal of Economic Growth Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
€34.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price includes VAT (Germany)

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Explore related subjects

Discover the latest articles and news from researchers in related subjects, suggested using machine learning.

References

  • Acemoglu D. (2005) Politics and economics in weak and strong states. Journal of Monetary Economics 52: 1199–1226

    Article  Google Scholar 

  • Cantoni D., Johnson S., Robinson J. (2011b) The Consequences of radical reform: The French revolution. American Economic Review 101: 3286–3307

    Article  Google Scholar 

  • Acemoglu D., Johnson S., Robinson J. (2001) Colonial origins of comparative development: An empirical investigation. American Economic Review 91: 1369–1401

    Article  Google Scholar 

  • Acemoglu D., Johnson S., Robinson J. (2002) Reversal of fortune: Geography and development in the making of the modern world income distribution. Quarterly Journal of Economics 117: 1231–1294

    Article  Google Scholar 

  • Acemoglu D., Johnson S., Robinson J. (2005) The rise of Europe: Atlantic trade, institutional change, and economic growth. American Economic Review 94: 546–579

    Article  Google Scholar 

  • Acemoglu D., Robinson J., Verdier T. (2004) Alfred Marshall lecture—Kleptocracy and divide-and-rule: A model of personal rule. Journal of the European Economic Association 2: 162–192

    Article  Google Scholar 

  • Acemoglu D., Ticchi D., Vindigni A. (2011a) Emergence and persistence of inefficient states. Journal of the European Economic Association 9: 177–208

    Article  Google Scholar 

  • Aidt T., Jensen P. (2009) The taxman tools up: An event history study of the introduction of the personal income tax, 1815–1938. Journal of Public Economics 93: 160–175

    Article  Google Scholar 

  • Alesina A., Devleeschauwer A., Easterly W., Kurlat S., Wacziarg R. (2002) Fractionalization. Journal of Economic Growth 8: 155–194

    Article  Google Scholar 

  • Ashraf Q., Galor O. (2011) Dynamics and stagnation in the Malthusian epoch. American Economic Review 101: 2003–2041

    Article  Google Scholar 

  • Ashraf, Q., & Galor, O. (2012). The ‘out of Africa’ hypothesis, human genetic diversity, and comparative economic development. American Economic Review, forthcoming.

  • Bates R. (2001) Prosperity and violence. Norton, New York

    Google Scholar 

  • Beber, B. (2009). The effects of international mediation on war settlement: An instrumental variables approach. Mimeo, New York University.

  • Besley T., Persson T. (2008) Wars and state capacity. Journal of the European Economic Association 2: 522–530

    Article  Google Scholar 

  • Besley T., Persson T. (2009) The origins of state capacity: Property rights, taxation, and politics. American Economic Review 99: 1218–1244

    Article  Google Scholar 

  • Besley T., Persson T. (2010) State capacity, conflict, and development. Econometrica 78: 1–34

    Article  Google Scholar 

  • Besley T., Persson T. (2011) Pillars of prosperity. Princeton University Press, Princeton, NJ

    Google Scholar 

  • Bockstette V., Chanda A., Putterman L. (2002) States and markets: The advantage of an early start. Journal of Economic Growth 7: 347–369

    Article  Google Scholar 

  • Brennan G., Buchanan J. (1980) The power to tax. Cambridge University Press, Cambridge

    Google Scholar 

  • Brewer J. (1989) The sinews of power. Unwin Hyman, London

    Google Scholar 

  • Cardoso J., Lains P. (2010) Paying for the liberal state. Cambridge University Press, Cambridge

    Google Scholar 

  • Centeno M. (1997) Blood and debt: War and taxation in nineteenth-century Latin America. American Journal of Sociology 102: 1565–1605

    Article  Google Scholar 

  • Central Intelligence Agency. (2009). The CIA World Factbook. https://www.cia.gov/library/publications/the-world-factbook/.

  • Chanda A., Putterman L. (2007) Early starts, reversals, and catch-up in the process of economic development. Scandinavian Journal of Economics 109: 387–413

    Article  Google Scholar 

  • Clodfelter M. (2002) Warfare and armed conflicts: A statistical reference, 1500–2000. McFarland, Jefferson

    Google Scholar 

  • Comin D., Easterly W., Gong E. (2010) Was the wealth of nations determined in 1000 BC?. American Economic Journal: Macroeconomics 2: 65–97

    Article  Google Scholar 

  • Conley T., Hansen C., Rossi P. (2012) Plausibly exogenous. Review of Economics and Statistics 94: 260–272

    Article  Google Scholar 

  • Cox G. (2011) War, moral hazard, and ministerial responsibility: England after the glorious revolution. Journal of Economic History 71: 133–161

    Article  Google Scholar 

  • De Long J. B., Shleifer A. (1993) Princes and merchants: European city growth before the industrial revolution. Journal of Law and Economics 36: 671–702

    Article  Google Scholar 

  • Diamond J. (1997) Guns, germs, and steel. Norton, New York

    Google Scholar 

  • Dincecco M. (2009) Fiscal centralization, limited government, and public revenues in Europe, 1650–1913. Journal of Economic History 69: 48–103

    Article  Google Scholar 

  • Dincecco M. (2011) Political transformations and public finances. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Dincecco M., Federico G., Vindigni A. (2011) Warfare, taxation, and political change: Evidence from the Italian Risorgimento. Journal of Economic History 71: 887–914

    Article  Google Scholar 

  • Engerman S., Sokoloff K. (1997) Factor endowments, institutions, and differential paths of growth among new world economies. In: Haber S. (ed) How Latin America fell behind. Stanford University Press, Palo Alto, CA

    Google Scholar 

  • Ferguson N. (2006) Political risk and the international bond market between the 1848 Revolution and the Outbreak of the First World War. Economic History Review 59: 70–112

    Article  Google Scholar 

  • Frankel J., Romer D. (1999) Does trade cause growth?. American Economic Review 89: 379–399

    Article  Google Scholar 

  • Galor O., Moav O., Vollrath D. (2009) Inequality in land ownership, the emergence of human capital promoting institutions, and the great divergence. Review of Economic Studies 76: 143–179

    Article  Google Scholar 

  • Galor O., Weil D. (1999) From Malthusian stagnation to modern growth. American Economic Review 89: 150–154

    Article  Google Scholar 

  • Galor O., Weil D. (2000) Population, technology and growth: From Malthusian stagnation to the demographic transition and beyond. American Economic Review 90: 806–828

    Article  Google Scholar 

  • Gerschenkron A. (1966) Economic backwardness in historical perspective. Belknap Press, Cambridge, MA

    Google Scholar 

  • Glaeser E., La Porta R., Lopez-de-Silanes F., Shleifer A. (2004) Do institutions cause growth?. Journal of Economic Growth 9: 271–303

    Article  Google Scholar 

  • Guiso L., Sapienza P., Zingales L. (2009) Cultural biases in economic exchange?. Quarterly Journal of Economics 124: 83–116

    Article  Google Scholar 

  • Hall R., Jones C. (1999) Why do some countries produce so much more output per worker than others?. Quarterly Journal of Economics 114: 83–116

    Article  Google Scholar 

  • Herbst J. (2000) States and power in Africa. Princeton University Press, Princeton, NJ

    Google Scholar 

  • Heston, A., Summers, R., & Aten, B. (2006). Penn world tables, Version 6.2. Philadelphia: Center for International Comparisons of Production, Income and Prices, University of Pennsylvania.

  • Hines J., Summers L. (2009) How globalization affects tax design. Tax Policy and the Economy 23: 123–158

    Google Scholar 

  • Hoffman, P. (2009). Why was it that Europeans conquered the world? Mimeo, California Institute of Technology.

  • Hoffman P., Rosenthal J. L. (1997) The political economy of warfare and taxation in early modern Europe: historical lessons for economic development. In: Drobak J., Nye J. (eds) The frontiers of the new institutional economics. Academic Press, St. Louis, MO

    Google Scholar 

  • Hoffman, P., & Rosenthal, J. L. (2000). Divided we fall: The political economy of warfare and taxation. Mimeo, California Institute of Technology.

  • International Monetary Fund Staff. (2009). Government Financial Statistics. www.imf.org/external/data.htm.

  • Jaggers, K., & Marshall, M. (2000). Polity IV Project: Political regime characteristics and transitions, 1800–2007. Fairfax, VA: Center for Systematic Peace, George Mason University.

  • Kang D. (2002) Crony capitalism: Corruption and development in South Korea and the Philippines. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Keegan J. (1994) A history of warfare. Vintage, London

    Google Scholar 

  • Klein Goldewijk K., Beusen A., de Vos M., van Drecht G. (2010) The HYDE 3.1 spatially explicit database of human-induced land use change over the past 12,000 years. Global Ecology and Biogeography 20(1): 73–86

    Article  Google Scholar 

  • Knack S., Keefer P. (1995) Institutions and economic performance: Cross-country tests using alternative measures. Economics & Politics 7: 207–227

    Article  Google Scholar 

  • La Porta R., Lopez-de-Silanes F., Shleifer A., Vishny R. (1998) Law and finance. Journal of Political Economy 106: 1123–1155

    Google Scholar 

  • Levi M. (1988) Of rule and revenue. University of California Press, Berkeley, CA

    Google Scholar 

  • Lindert P. (2004) Growing public. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Magnusson L. (2009) Nation, state, and the industrial revolution. Routledge, London

    Google Scholar 

  • Migdal J. (1988) Strong societies and weak states. Princeton University Press, Princeton, NJ

    Google Scholar 

  • Mokyr J. (1998) The second industrial revolution, 1870–1914. In: Castronono V. (ed) Storia dell’economia Mondiale. Laterza, Rome

    Google Scholar 

  • Mokyr J. (1999) The British industrial revolution. Westview, Boulder

    Google Scholar 

  • North D. (1981) Structure and change in economic history. Norton, New York

    Google Scholar 

  • Nunn N. (2008) The long term effects of Africa’s Slave Trades. Quarterly Journal of Economics 123: 139–176

    Article  Google Scholar 

  • Nunn N. (2009) The importance of history for economic development. Annual Review of Economics 1: 65–92

    Article  Google Scholar 

  • O’Brien P. (2011a) The nature and historical evolution of an exceptional fiscal state and its possible significant for the precocious commercialization and industrialization of the British Economy from Cromwell to Nelson. Economic History Review 64: 408–446

    Article  Google Scholar 

  • O’Brien, P. (2011b). The contributions of warfare with revolutionary and Napoleonic France to the consolidation and progress of the British Industrial Revolution. Working Paper 150/11, London School of Economics.

  • Ohanian L., Raffor A., Rogerson R. (2008) Long-term changes in labor supply and taxes: Evidence from OECD countries, 1956–2004. Journal of Monetary Economics 55: 1353–1362

    Article  Google Scholar 

  • Persson T., Tabellini G. (2000) Political economics. MIT Press, Cambridge, MA

    Google Scholar 

  • Persson T., Tabellini G. (2003) The economic effects of constitutions. MIT Press, Cambridge, MA

    Google Scholar 

  • Prescott E. (2004) Why do Americans work so much more than Europeans?. Federal Reserve Bank of Minneapolis Quarterly Review 28: 2–13

    Google Scholar 

  • Putterman, L. (2006). Agricultural transition year country data set. Mimeo, Brown University.

  • Putterman, L. (2007). State antiquity index, version 3. Mimeo, Brown University.

  • Putterman L., Weil D. (2010) Post-1500 population flows and the long run determinants of economic growth and inequality. Quarterly Journal of Economics 125: 1627–1682

    Article  Google Scholar 

  • Rodrik D. (1998) Why do more open economies have bigger governments?. Journal of Political Economy 106: 997–1032

    Article  Google Scholar 

  • Roland, G. (2010). The long-run weight of communism or the weight of long-run history? Working Paper 2010/83, United Nations University.

  • Rosenthal J. L., Wong R. B. (2011) Before and beyond divergence. Harvard University Press, Cambridge, MA

    Google Scholar 

  • Sarkees M. (2000) The correlates of war data on war: An update to 1997. Conflict Management and Peace Science 18: 123–144

    Article  Google Scholar 

  • Scheve K., Stasavage D. (2010) The conscription of wealth: Mass warfare and the demand for progressive taxation. International Organization 64: 529–561

    Article  Google Scholar 

  • Scheve K., Stasavage D. (2012) Democracy, war, and wealth: Evidence of two centuries of inheritance taxation. American Political Science Review 106: 81–102

    Article  Google Scholar 

  • Tilly C. (1990) Coercion, capital, and European states, 990–1990. Blackwell, Cambridge

    Google Scholar 

  • Wade R. (1990) Governing the market. Princeton University Press, Princeton, NJ

    Google Scholar 

  • Wittfogel K. (1957) Oriental despotism. Yale University Press, New Haven, CT

    Google Scholar 

  • World Bank Staff. (2011). World Development Indicators www.data.worldbank.org/indicator.

  • World Values Survey Association. (2009). World Values Survey, 1981–2008. www.worldvaluessurvey.org/.

Download references

Author information

Authors and Affiliations

  1. IMT Lucca Institute for Advanced Studies, Lucca, Italy

    Mark Dincecco

  2. Copenhagen Business School, Frederiksberg, Denmark

    Mauricio Prado

Authors
  1. Mark Dincecco
    View author publications

    You can also search for this author inPubMed Google Scholar

  2. Mauricio Prado
    View author publications

    You can also search for this author inPubMed Google Scholar

Corresponding author

Correspondence to Mark Dincecco.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Dincecco, M., Prado, M. Warfare, fiscal capacity, and performance. J Econ Growth 17, 171–203 (2012). https://doi.org/10.1007/s10887-012-9079-4

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10887-012-9079-4

Keywords

JEL Classification