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.

This article is a revised version of the third chapter of my Ph.D. dissertation (UCLA, 2006). I am very grateful to my graduate advisor, Jean-Laurent Rosenthal, as well as to Naomi Lamoreaux. I would also like to thank

We present new evidence about the long-run relationship between state capacity and economic performance in Europe, the birthplace of modern economic growth. Our database is novel and spans 11 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 state's capacity to extract greater tax revenues was one mechanism through which both fiscal centralization and, to some extent, limited government played significant economic roles. We believe that our analysis is among the first to show systematic evidence that state capacity is an important determinant of long-run economic growth.

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.

How did today's rich states first establish modern fiscal systems? To answer this question, Political Transformations and Public Finances by Mark Dincecco examines the evolution of political regimes and public finances in Europe over the long term. The book argues that the emergence of efficient fiscal institutions was the result of two fundamental political transformations that resolved long-standing problems of fiscal fragmentation and absolutism. States gained tax force through fiscal centralization and restricted ruler power through parliamentary limits, which enabled them to gather large tax revenues and channel funds toward public services with positive economic benefits. Using a novel combination of descriptive, case study and statistical methods, the book pursues this argument through a systematic investigation of a new panel database that spans eleven countries and four centuries. The book's findings are significant for our understanding of economic history and have important consequences for current policy debates.

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 nonmilitary 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 budget is the skeleton of the state, stripped of any misleading ideologies."Sociologist Rudolf Goldscheid, 1926 1 ublic finances are the sinews of state power. A growing theoretical literature examines the interplay between wars, fiscal policy, and economic development. 2This literature takes inspiration from historical works that investigate the relationship between external conflicts and fiscal innovations that enabled states to gather greater wartime funds.

We present new evidence about the relationship between military conflict and city population growth in Europe from the fall of Charlemagne's empire to the start of the Industrial Revolution. Military conflict was a main feature of European history.We argue that cities were safe harbors from conflict threats. To test this argument, we construct a novel database that geocodes the locations of more than 800 conflicts between 800 and 1799. We find a significant, positive, and robust relationship that runs from conflict exposure to city population growth. Our analysis suggests that military conflict played a key role in the rise of urban Europe.

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