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Well-functioning modern states require well-functioning modern bureaucracies. In an increasingly complex political-economic world, bureaucratic expertise is evermore important. Yet in many states around the world, the bureaucratic capacity is still lacking. Why did some states develop into bureaucratic powerhouses, whereas others are incapable of delivering even the most basic public services to their citizens? In this paper, I develop a theoretical argument about the origins of early bureaucratic capacity. I contend that certain economic structures can provide elites with incentives to expand the bureaucratic capacity of the state. On the other hand, when independent bureaucrats threaten rents and the status of existing elites, constraining capacity remains optimal. To investigate our argument I have collected data on several different measures of local level bureaucratic capacity in the late 19th and early 20th century in Prussia. I combine this data at the city and county level with covariates about local economic and political conditions, as well as elite group characteristics.