State capacity - the government's ability to accomplish its intended policy goals - plays an important role in market-oriented economic development today. Yet state capacity improvements are often difficult to achieve. This Element analyzes the historical origins of state capacity. It evaluates long-run state development in Western Europe - the birthplace of both the modern state and modern economic growth - with a focus on three key inflection points: the rise of the city-state, the nation-state, and the welfare state. This Element develops a conceptual framework regarding the basic political conditions that enable the state to take effective policy actions. This framework highlights the government's challenge to exert proper authority over both its citizenry and itself. It concludes by analyzing the European state development process relative to other world regions. This analysis characterizes the basic historical features that helped make Western Europe different. By taking a long-run approach, it provides a new perspective on the deep-rooted relationship between state capacity and economic development.

This publication considers options for strengthening institutional capacity within the public sector in African countries, by drawing on the experiences of public sector reform programmes in over a dozen African states. Issues discussed include: the relationship between governance and economic development, public expenditure and accountability, anti-corruption reforms, the politics of decentralisation, political structures and public service delivery.

We study the direct and spillover effects of local state capacity using the network of Colombian municipalities. We model the determination of local and national state capacity as a network game in which each municipality, anticipating the choices and spillovers created by other municipalities and the decisions of the national government, invests in local state capacity and the national government chooses the presence of the national state across municipalities to maximize its own payoff. We then estimate the parameters of this model using reduced-form instrumental variables techniques and structurally (using GMM, simulated GMM or maximum likelihood). To do so we exploit both the structure of the network of municipalities, which determines which municipalities create spillovers on others, and the historical roots of local state capacity as the source of exogenous variation. These historical instruments are related to the presence of colonial royal roads and local presence of the colonial state in the 18th century, factors which we argue are unrelated to current provision of public goods and prosperity except through their impact on their own and neighbors' local state capacity. Our estimates of the effects of state presence on prosperity are large and also indicate that state capacity decisions are strategic complements across municipalities. As a result, we find that bringing all municipalities below median state capacity to the median, without taking into account equilibrium responses of other municipalities, would increase the median fraction of the population above poverty from 57% to 60%. Approximately 57% of this is due to direct effects and 43% to spillovers. However, if we take the equilibrium response of other municipalities into account, the median would instead increase to 68%, a sizable change driven by equilibrium network effects. Keywords: Colombia, economic development, networks, public goods, state capacity. JEL Classification: H4, H7, P16.

* Melds theoretical models with practical experience * Written by world-renowned experts on public administration * Guides future policy debates on helping to build effective and efficient states How does a government seeking to participate in and benefit from an integrated and interdependent world become more professional, technologically proficient, deregulated, and accountable? Reinventing Government for the Twenty-First Century tells you how. The authors identify the forces of globalization and the structural changes needed to increase state capacity and enhance global-scale participation. Professionals directly involved in assisting governments show public leaders and administrators how to improve the quality of their performance in government.

We report on an on-going project, which asks a number of questions relevant to the study of state capacity. What are the main economic and political determinants of the state's capacity to raise revenue and support private markets? How do risks of violent conflict affect the incentives to invest in state building? Does it matter whether conflicts are external or internal to the state? When are large states associated with higher income levels and growth rates than small states? What relations should we expect between resource rents, civil wars and economic development? The paper is organized into three main sections: 1. The origins of state capacity, 2. Sate capacity and the genius of taxation, and 3. State capacity and the strategy of conflict. Each of these begins with a specific motivation. A simple model is formulated to analyze the determinants of state capacity in the first section, and modified to address the new issues that arise in subsequent sections. The theoretical results are summarized in a number of propositions. We discuss the implications of the theory, comment on its relation to existing literature, and briefly mention some empiric applications.

Building and operating successful public institutions is a perennial and long-term challenge for governments. Drawing on research carried out on nine public agencies in Lao PDR, Sierra Leone, The Gambia, and Timor Leste, this volume identifies the shared mechanisms underpinning institutional success in fragile states.

'State capacity' is a term associated with a popular argument in fiscal sociology, history, and political economy regarding the role of the state in the process of economic development. Much of the applied and theoretical work on state capacity already shows some influence from public choice theory, the application of the economic approach to the study of political processes. These commonalities notwithstanding, this paper argues that public choice theory can offer further insights into this literature. In particular, the public choice approach can help illuminate concepts such as those of 'state capacity' and 'governance,' which are often casually employed in the literature. It can also help us understand the interaction between state capacity and competitive pressures in the 'market for governance'. Finally, insights from public choice can illuminate the causal nexus between investment in state capacity and economic development.

In this paper, we explore why there are no examples of societies with low state capacity and high economic development. We argue that such an outcome is unlikely because of the nature of investments in state capacity. Societies that become rich in the absence of a strong state invite predation by societies that develop such states. Thus societies invest in state capacity, in part, to plunder other societies' wealth. Those investments are a form of rent-seeking. Potentially preyed-upon societies are forced to invest in state capacity in turn so as to deter potential attackers. This entails that as soon as a rent seeker enters the game, the likelihood of a low-capacity, high-development society surviving falls. This explains the historical lack of such societies. We thus interpret state capacity not as a causal condition for widespread economic prosperity, but a survivability condition for enjoying this prosperity.

State Capacity in East Asia examines states and state capacity in four countries - China, Japan, Taiwan, and Vietnam - that have experienced rapid economic growth over several decades. The book is informed by the view that even though modern market forces and transnational corporations exertnew pressures which erode some powers formerly held by the nation-state, it is much too early to declare the state dead. The modern state is constantly being shaped by social interaction in a process of mutual empowerment at both the central and local level. States also have a history which is builtinto their structures and ideology and will influence the way they change and adapt to outside pressures. The book argues that the capability to adapt and to develop new capacities and institutions is at the heart of the Asian states' recovery from the deep economic and social crisis of the late1990s.