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Powerful, centralized states controlling a large share of national income only begin to appear in Europe after 1500. We build a model that explains their emergence in response to the increasing importance of money for military success. When fiscal resources are not crucial for winning wars, the threat of external conflict stifles state-building. As finance becomes critical, internally cohesive states invest in state capacity while divided states rationally drop out of the competition, causing divergence. We emphasize the role of the \"Military Revolution\", a sequence of technological innovations that transformed armed conflict. Using data from 374 battles, we investigate empirically both the importance of money for military success and patterns of state-building in early modern Europe. The evidence is consistent with the predictions of our model.

The presence of a state is one of the most reliable historical predictors of social and economic development. In this article, we complete the coding of an extant indicator of state presence from 3500 BCE forward for almost all but the smallest countries of the world today. We outline a theoretical framework where accumulated state experience increases aggregate productivity in individual countries but where newer or relatively inexperienced states can reach a higher productivity maximum by learning from the experience of older states. The predicted pattern of comparative development is tested in an empirical analysis where we introduce our extended state history variable. Our key finding is that the current level of economic development across countries has a hump-shaped relationship with accumulated state history.

African colonial history suggests that British colonial rule may have undermined state centralisation due to legacies of ethnic segregation and stronger executive constraints. Using micro-data from anglophone and francophone countries in sub-Saharan Africa, we find that anglophone citizens are less likely to identify themselves in national terms (relative to ethnic terms). To address endogeneity concerns, we utilise regression discontinuity by focusing on observations near anglophonefrancophone borders, both across countries and within Cameroon. Evidence on taxation, security and the power of chiefs also suggests weaker state capacity in anglophone countries. These results highlight the legacy of colonial rule on state-building.

This paper contributes to the literature on the determinants of the expansion of mass schooling and the long-term legacy of educational institutions. Based on a new provincial-level dataset for Italy in the period 1861–1911, we argue that different models of schooling provision adopted by the different pre-unification polities influenced primary-education organizations across macro-regions up to WWI. As a result, school access and the capability to generate literacy given current rates of enrollment differed substantially, with the Northern regions aiming to increase schooling for all, while the Center and the South implemented a more elitist model.

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.

State capacity matters for growth. I test Bates’ explanation of pre-colonial African states. He argues that trade across ecological boundaries promoted states. I find that African societies in ecologically diverse environments had more centralized states. This is robust to reverse causation, omitted heterogeneity, and alternative interpretations of the link between diversity and states. The result survives including non-African societies. I test mechanisms connecting trade to states, and find that trade supported class stratification between rulers and ruled. I underscore the importance of ethnic institutions and inform our knowledge of the effects of trade on institutions.

This paper studies the relationship between military conflicts and state-building in pre-imperial China. I develop an incomplete contract model to examine rulers’ and local administrators’ incentives in conflict. Defensive wars drive decentralization: landowning local administrators have more to gain from a successful defense and are therefore more committed to it. Offensive wars drive centralization: the landowning ruler has personnel control over the non-land-owning local administrator and can therefore force the latter to participate in less lucrative attacks. Model predictions are corroborated with empirical evidence and historical case studies, and offer broader implications for the political divergence between China and Europe.

How do external threats to state sovereignty benefit local development? In this paper, we look at Thailand’s railroad projects in the late-nineteenth and early-twentieth centuries as an example of a state’s strategic response to colonial encroachment. By transporting government officials and establishing a permanent administrative presence, the railways served to ensure Thailand’s sovereignty over peripheral regions and bring them under direct governance. These regions, long considered economically unviable and disconnected from Bangkok, gained rail access due to their strategic importance and, in turn, witnessed urbanization and increased agricultural production.

This paper quantitatively analyzes the stability and breakup of nations. The tradeoff between increasing returns in the provision of public goods and the costs of greater cultural heterogeneity mediates agents' preferences over different geographical configurations, thus determining the likelihood of secessions and unions. After calibrating the model to Europe, we identify the regions prone to secession and the countries most likely to merge.We then estimate the implied monetary gains from EU membership. As a test of the theory, we show that the model can account for the breakup of Yugoslavia and the dynamics of its disintegration. We find that economic differences between the Yugoslav republics determined the order of disintegration, but cultural differences, though small, were key to the country's instability. The paper also provides empirical support for the use of genetic distances as a proxy for cultural heterogeneity.

This review article examines the development of state capacity—the extractive and productive power of states— in European history. To explain the historical evolution of state capacity, I focus on the role of political innovations. I relate state capacity improvements to long-run economic growth and the establishment of twentieth-century welfare states. The article concludes with historical lessons for developing nations today. “In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.” James Madison (1788, p. 257)