Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/289568 
Year of Publication: 
2024
Series/Report no.: 
ECONtribute Discussion Paper No. 282
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
Formal conceptions of state capacity have mostly focused on indirect measures of state capacity - by, for instance, using the state's fiscal or extractive capacity as a proxy for its overall capacity. Yet, this input or extractive view of state capacity falls short, especially since cross-country empirical evidence suggests that similar levels of fiscal capacity, measured by tax revenues as a percentage of GDP, can produce starkly different outputs - both in classic economic terms and in broader terms that citizens would recognize as desirable outcomes, including quality of life, health, security, equality of opportunity, and intergenerational mobility. This paper argues that a central step towards addressing these shortcomings of the conventional view is to account for a crucial and largely ignored boundary of the state or dimension of state capacity: its capacity to gather, process, and deploy information in its conduct of fiscal policy. Specifically, we study how the presence or lack of such informational capacity constrains governments in responding to crises, such as the recent energy price shock. Our framework provides the analytical toolkit to examine how the informational boundary of the state shapes the incentives for policymakers to resort to untargeted and/or distortionary policy instruments, as opposed to targeted and non-distortionary ones, in responding to crises. The policy response to the energy crisis following the invasion of Ukraine provides the empirical context upon which we bring this theoretical framework to bear on data, though the latter can be straightforwardly extended to other recent crises.
Subjects: 
state capacity
economic development
carbon taxation
political economy
pork-barrel politics
JEL: 
H11
O43
D63
D73
Q48
P16
C21
C55
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.