Investments in Fiscal Capacity Under Dictatorship and Democracy, 1815-2015

• In Event: Building Autocracy: New Theoretical Insights and Empirical Findings

Abstract

This paper is concerned with the origins of fiscal capacity in non-democratic states. While there is broad consensus that fiscal capacity is important when explaining economic growth and human well-being, its historical origins are debated. The existing literature – stressing interstate warfare and democratization as major determinants -- suffers from two shortcomings. First, in many important cases of state-building (e.g., Europe in the long nineteenth century) both war and democracy were often absent. In this paper we present an alternative theory of fiscal capacity, focusing on domestic political institutions in non-democratic states. The second shortcoming is a lack of adequate empirical data. The most common approach is to use the outcome of the tax or revenue collection process (i.e., what amounts are actually collected) as an indicator of fiscal capacity. What kinds of concrete investments by the state that actually leads to increased revenues is less well studied. The empirical contribution is to develop a dataset on such investments from a sample of current and former great powers since the end of the Napoleonic wars. More specifically, we concentrate on the administrative hurdles in terms of recruitment, remuneration and training that needs to be overcome in order to significantly enhance the state’s revenue collecting capacity. To that end, we concentrate on a specific governmental institution, the ministry of finance, and collect data on, e.g., the turnover of top and senior officials as well as the number of employees and their labor costs. The purpose of this paper is to present a first version of this novel dataset together with qualitative illustrations of some prominent historical cases.

Authors

• Jan Teorell, Stockholm University

• Per Fredrik Andersson, University of Copenhagen

• Oriol Sabaté, University of Barcelona