Ethnic Composition, Legibility and the Conditional Effect of War on Fiscal Capacity

Abstract

There has been substantial debate on whether the argument that warfare enhances state capacity can be applied to contexts other than Western Europe. The argument in this paper is that the relationship between war and fiscal capacity is conditional on the ethnic composition of the population. More specifically, ethnic heterogeneity and ethnic dissimilarity should result in higher illegibility of the society to the state. This illegibility should make the returns from investment in fiscal capacity lower and consequently ethnically heterogeneous and dissimilar populations should hinder state's investment and increases in fiscal capacity during wartime. These expectations are tested and confirmed with an original local-level fiscal revenue data set in the late Ottoman Empire. Wartime changes in local-level fiscal revenues are higher in ethnically more homogeneous and also in ethnically more similar provinces.