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We bridge two areas of study by applying panel vector autoregression (PVAR) to human capital, political institutions, economic institutions, and economic output per capita. Institutions and human capital have competed within the scholarly literature as hypotheses explaining the origins of economic growth. Elsewhere, our measure of economic institutions, the Economic Freedom of the World index, has recently been explored extensively as a dependent variable, whereas previously it had been used as an explanatory variable. We wish to measure the interrelationships between political and economic institutions, as well as their interrelationships with economic output and human capital, in contrast to the literature which emphasizes the importance of political institutions alone. We explore these interrelationships in a PVAR model, finding that, descriptively at least, higher-quality economic institutions are associated with more output. We also find weak evidence that higher-quality political institutions are associated with less output and less education. We also find a robust positive effect of education on the quality of economic institutions. In performing this analysis, we contribute to the literature on the institutions and human capital debate, as well as to the literature on the causes of free economic institutions.

This paper contributes to the literature on state capacity by developing a method that yields an index of state capacity with far more comprehensive data coverage across time and countries than has been possible previously. Unlike narrower measures of fiscal capacity or legal capacity, the index is more comprehensive, using data from the Varieties of Democracy dataset on fiscal capacity, a state's control over its territory, the rule of law, and the provision of public goods used to support markets. Like the previous literature, it demonstrates that the historical prevalence of warfare predicts state capacity. Several exercises are performed to demonstrate the validity of the index in measuring state capacity. ECONOMICA [JULYWe take a few steps to replicate previous results in the state capacity literature to demonstrate the effectiveness of the index. Most notably, we follow Besley and Persson (2009) in demonstrating empirically the link between the frequency of warfare and state capacity as of 1975. We are able to find the relationship using their original specification, and in Appendix C, we test the relationship exhaustively, thereby showing a correlation and a potential causal link between state warfare and state capacity in a set of specifications that is far more comprehensive than previously considered (while also showing that civil wars negatively predict state capacity). In Appendix D, we consider numerous specifications relating state capacity to economic performance, including a replication of the findings from Dincecco and Prado (2012).The structure of the paper is as follows. Section II reviews much of the existing literature on state capacity. Section III constructs our index. Section IV replicates the findings of Besley and Persson (2009) by linking war to state capacity. Section V concludes. Further empirical applications are found in Appendices C and D. I. LITERATURE REVIEW Efforts to measure state capacity have been made in the recent past, often with the use of Worldwide Governance Indicators (WGI). Fukuyama (2014) combines the 'Government Effectiveness' and 'Control of Corruption' indicators; Andrews et al. (2017) use these two indicators in conjunction with 'Rule of Law'; and most recently, Pritchett (2021) uses the three used by Andrews et al. (2017) along with 'Regulatory Quality'. Using WGI is frequently sensible, but it has a limited time dimension, preventing its use for more historical questions.Other contemporary data sources with similar limitations include the International Country Risk Guide (ICRG) and the Fragile States Index (FSI). Besley and Persson (2011, pp. 310-11) measure legal capacity using the contract enforcement index in the World Bank Doing Business dataset, and fiscal capacity as the share of government revenue raised by income tax. When questions of history are most relevant, however, researchers have tended to rely on historical tax revenue as a means of measuring fiscal capacity (see, for example, Gennaioli and Voth 2015), and therefore proxying state capacity o...

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