Year: 2007
Type: report
Abstract: Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens.However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today.This paper develops a framework where "policy choices", regulation of markets and tax rates, are constrained by "economic institutions", which in turn reflect past investments in legal and fiscal state capacity.We study the economic and political determinants of these investments.The analysis shows that common interest public goods, such as fighting external wars, as well as political stability and inclusive political institutions, are conducive to building state capacity.Preliminary empirical evidence based on cross-country data find a number of correlations consistent with the theory.
DOI: 10.3386/w13028
Authors: Timothy Besley, Torsten Persson
Language: English
Subfield: Demography
Field: Social Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1987352968