New working paper: State Capacity and the Post Office: Evidence from 19th Century Quebec

Earlier this week, Michael Makovi and I submitted the following paper for publication. It concerns the theory of state capacity and its measurement. We argue that one of the proposed channels from which strong and capable states are able to foster economic development is not generalizable. That channel, the Post Office’s role as market coordinator, has been used frequently especially in economic history. We use the insights proposed by others to test it in Quebec between 1831 and 1861 (an area for which there is excellent data). The abstract is below and the paper is available here on SSRN: 

The theory of state capacity predicts that states with powerful abilities—as long as they are constrained—can promote economic growth, because these abilities can serve to support market development. A difficulty in the study of state capacity relates to its measurement. Some scholars, especially in economic history, argue that post offices area proxy for government effectiveness and state capacity (Chong et al., 2014; Acemoglu et al., 2016; Rogowski et al., 2017; Jensen and Ramey, 2019), because a well-functioning communication network helps markets operate. We test whether this claim is generalizable by using data from nineteenth century Quebec. We use a difference-in-difference method to estimate the effect of gaining, or losing, a post office on the value of agricultural output per acre between 1831 and 1861. We find no treatment effect, implying that post offices had no relationship with agricultural productivity. This may suggest that post offices are not a valid proxy for state capacity or, at the very least, that they do not constitute generalizable evidence

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