States and Markets: The Advantage of an Early Start

Abstract

States and markets have sometimes been viewed as competitors, but in the last decade, there has been increasing agreement that a capable state can play an important facilitating role in the process of economic development. A number of studies have explored the empirical connection between measures of political stability and bureaucratic competence, on the one hand, and rates of economic growth, on the other. There is some evidence from these, and also arguments at the case study level, that a stable and competent state is indeed a contributing factor in economic growth. In this short paper, we investigate the possibility that differences not only in state capacity but more broadly, in the capacity to mount an effective drive toward economic development, derive in part from very long run historical processes giving rise to different potentials for growth. We test the idea that more longstanding experience with a national state in the past is associated, in recent times, with (a) greater political stability and better quality government, (b) higher incomes, and (c) faster rates of economic growth.