Mark Dincecco

Fiscal Centralization, Limited Government, and Public Revenues in Europe, 1650-1913

Old Regime polities typically suffered from fiscal fragmentation and absolutist rule. By the start of World War I, however, many such countries had centralized institutions and limited government. This article uses a new panel data set to perform a statistical analysis of political regimes and public revenues in Europe from 1650 to 1913. Panel regressions indicate that centralized and limited regimes were associated with significantly higher revenues than fragmented and absolutist ones. Structural break tests also suggest close relationships between major turning points in revenue series and political transformations.

Warfare, fiscal capacity, and performance

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.

WARFARE, TAXATION, AND POLITICAL CHANGE: EVIDENCE FROM THE ITALIAN RISORGIMENTO

We examine the relationships between warfare, taxation, and political change in the context of the political unification of the Italian peninsula. Using a comprehensive new database, we argue that external and internal threat environments had significant implications for the demand for military strength, which in turn had important ramifications for fiscal policy and the likelihood of constitutional reform and related improvements in the provision of non-military public services. Our analytic narrative complements recent theoretical and econometric works about state capacity. By emphasizing public finances, we also uncover novel insights about the forces underlying state formation in Italy.

THE POLITICAL ECONOMY OF FISCAL PRUDENCE IN HISTORICAL PERSPECTIVE

This paper uses a new panel dataset to perform a statistical analysis of political regimes and financial rectitude over the long run. Old Regime polities in Europe typically suffered from fiscal fragmentation and absolutist rule. By the start of World War I, however, many such countries had centralized institutions and limited government. Panel regressions indicate that political transformations toward centralized and limited regimes led to significant improvements in fiscal prudence. Dynamic estimations and structural breaks tests reinforce these findings. The results suggest that good financial housekeeping is one mechanism through which political reforms reduce sovereign credit risk.

State Capacity and Long‐Run Economic Performance

We present new evidence about the long-run relationship between state capacity -- the fiscal and administrative power of states -- and economic performance. Our database is novel and spans 11 European countries and 4 centuries from the Old Regime to World War I. We argue that national governments undertook two political transformations over this period: fiscal centralization and limited government. We find a significant direct relationship between fiscal centralization and economic growth. Furthermore, we find that an increase in the states capacity to extract greater tax revenues was one mechanism through which both political transformations improved economic performance. Our analysis shows systematic evidence that state capacity is an important determinant of long-run economic growth.

Political regimes and sovereign credit risk in Europe, 1750-1913

This article uses a new panel data set to perform a statistical analysis of political regimes and sovereign credit risk in Europe from 1750 to 1913. Old Regime polities typically suffered from fiscal fragmentation and absolutist rule. By the start of World War I, however, many such countries had centralized institutions and limited government. Panel regressions indicate that centralized and/or limited regimes were associated with significant improvements in credit risk relative to fragmented and absolutist ones. Structural break tests also reveal close relationships between major turning points in yield series and political transformations.

The Rise of Effective States in Europe

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.

Fragmented Authority from Ancien Régime to Modernity: A Quantitative Analysis

This paper performs a systematic analysis that examines institutional fragmentation in terms of customs tariffs within states west of the Rhine from 1700 to 1815 and between states east of the Rhine from 1815 to 1871. Internal customs zones are measured in two ways: physical size and urban population. Both methods use 175 sample cities as described by De Vries (1984) in England, France, the Netherlands, and Spain as the basic unit of account. The results indicate that customs zones west of the Rhine were small prior to the French Revolution but grew dramatically from 1789 onwards. They thus provide definitive evidence of divided authority in Ancien Regime Europe. The measurement of external customs zones uses 117 sample cities in the German and Italian territories. The findings indicate a remarkable degree of institutional consolidation between states east of the Rhine over the 1800s.

The Budgetary Origins of Fiscal-Military Prowess

This paper evaluates the budgetary origins of fiscal-military prowess, taking early modern Europe as a laboratory. We first review evidence that states adopting credible budgets accrued substantial advantages in raising taxes and loans. Since victory in war during the early modern period was largely a matter of out-spending one’s opponent, credible budgets should also have conferred an advantage in winning wars. Exploiting new panel data on 10 major European powers over several centuries, we show that credible budgets led to significantly larger wartime expenditures, and thus better chances of winning. To the best of our knowledge, this is the first systematic examination of its kind. Since credible budgets could be adopted by decidedly non-democratic polities, ours is a theory of limited government—rather than participative democracy—leading to military strength. That said, we discuss the implications of our analysis for the modern debate over the democratic victory thesis.

The Importance of Bureaucrats in a Weak State: Evidence from the Philippines

We present new evidence that individual bureaucrats matter for state capacity outcomes in a developing country context. We construct revenue district office-matched panel data for the Philippines that allow us to follow tax officers across different assignments. We find that bureaucrat fixed effects explain a significant extent of differences in local fiscal performance. We find that such differences are in part due to observable traits of bureaucrats. Finally, we find that effective officer-district matching appears to mitigate revenue loss due to the negative influence of political interference on tax officer assignments.