State Capacity and Economic Development: A Network Approach
- (pp. 2364-2409)
Abstract
We study the direct and spillover effects of local state capacity in Colombia. We model the determination of state capacity as a network game between municipalities and the national government. We estimate this model exploiting the municipality network and the roots of local state capacity related to the presence of the colonial state and royal roads. Our estimates indicate that local state capacity decisions are strategic complements. Spillover effects are sizable, accounting for about 50 percent of the quantitative impact of an expansion in local state capacity, but network effects driven by equilibrium responses of other municipalities are much larger. (JEL D85, H41, H77, O17, O18)Citation
Acemoglu, Daron, Camilo García-Jimeno, and James A. Robinson. 2015. "State Capacity and Economic Development: A Network Approach." American Economic Review, 105 (8): 2364-2409. DOI: 10.1257/aer.20140044Additional Materials
JEL Classification
- D85 Network Formation and Analysis: Theory
- H41 Public Goods
- H77 Intergovernmental Relations; Federalism; Secession
- O17 Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O18 Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure