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Warfare, fiscal capacity, and performance

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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.

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Authors and Affiliations

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

    Mark Dincecco

  2. Copenhagen Business School, Frederiksberg, Denmark

    Mauricio Prado

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  1. Mark Dincecco
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  2. Mauricio Prado
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Correspondence to Mark Dincecco.

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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

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