State Capacity and Economic Development: A Network Approach
Daron Acemoglu, Camilo García-Jimeno, James A. Robinson
American Economic Review · 2015 · Volume 105 · Issue 8
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)
Keywords
Network Formation and Analysis: Theory, Public Goods, Intergovernmental Relations, Federalism, Secession, Formal and Informal Sectors, Shadow Economy, Institutional Arrangements, Economic Development: Urban, Rural, Regional, and Transportation Analysis, Housing, Infrastructure
Enable JavaScript for citation tools and additional paper interactions.