Introduction
The article State Capacity and Long-Run Economic Performance by Mark Dincecco and Gabriel Katz (2016) explores the relationship between political transformations and sustainable economic growth. Specifically, the authors analyze how increasing state capacity and establishing a limited government in Europe affected the financial performance over several decades. They have found a positive relationship between capable states and increased GDP per capita. I chose this article because I am particularly interested in the relationship between the politics of development and economic growth. Moreover, the methodology employed in the article is of high quality and covers an extensive period.
Main body
State capacity is the ability of state institutions to enforce administrative and extractive policies to achieve the intended goal. Dincecco and Katz (2016) emphasize the legitimate concern that the existing literature on the political economy and politics of development pays little attention to state capacity’s effect on economic growth. Thus, I was curious about reading the relationship between these two variables. In other words, over the last decade, countries such as China, which has a significant state capacity, have substantially improved their economic situation. Therefore, I wondered whether having immense state capacity affects economic growth.
The article attempts to answer this question by exploring the relationship between political transformations and economic indicators. Specifically, they employ econometric methodology and an extensive database to analyze how limited government and increased state capacity in Europe from 1650 to 1913 have influenced economic growth. Dincocco and Kanz (2016) also applied several tests to prevent potential errors and statistical biases. The authors found that fiscally centralized regimes had a much higher and long-lasting GDP per capita than those decentralized fiscal regimes. Specifically, due to extractive state capacity, states were able to extract fiscal revenues more efficiently.
Conclusion
To conclude, I learned from the article that a weak state is one of the critical problems that might affect poor economic performance. More specifically, if the states cannot collect taxes from their citizens, their economic indicators are more likely to decline. Therefore, since governments play a crucial role in economic development, they should increase their state capacity. However, what improves the state capacity is a much more complicated issue that requires a separate discussion.
Reference
Dincecco, M., & Katz, G. (2016). State capacity and long-run economic performance. The Economic Journal, 126(590), 189–218.