War, Wealth and the Formation of States *

Carles Boix, Bruno Codenotti and Giovanni Resta

* Prepared for 2006 IPES Meeting.

PURPOSE

Examine analytically the dynamics of the formation of state systems.

Preceding literatures:

Macrohistorical approaches (Hintze, Tilly): variation explained as a function of coercion and capital; mostly comparative history.

Economic models (Alesina): trade integration & public good provision; mostly game theory.

Simulation analysis (Beson, Bremer & Mihalka, Cusack & Stoll, Cederman).

Here:

Analytical assumptions about rulers’ and states’ behavior; Emphasis on war and on factor endowments; Application of simulations

MICRO FOUNDATIONS

Anarchical world.

Rulers (states) maximize net revenue -- to maximize consumption and/or to have enough power to survive.

Although there may be several strategies to maximize revenue (trade, war, etc.), here we restrict the strategy of wealth maximization to territorial expansion.

DECISION RULES OF STATE (1)

Figure 2. State Territory and Total Cost Schedule

Territorial Size

Tot

al C

osts

Cost Function

C

Cf

SS1 S2

C1

C2

DECISION RULES OF STATE (2)

Figure 6. Size of the State

Territorial Size

Tot

al C

osts

Cost Function Revenue Function

R,C

SSMAX

R(S)=tY(S)

C(S)

C

R

VARIATION IN UNDERLYING PARAMETERS

Shift in Cost Function:

In fixed costs – higher starting costs, higher capital/labor ratio

In variable costs: change in military technology, change in compliance costs, strength of other rulers.

Shift in Revenue Function

Change in underlying wealth

Change in tax rate and effectiveness in tax collection

Types of taxable assets

SIMULATION ENVIRONMENT

CHANGES IN VARIABLE COSTS

Number of States for Different Levels of Variable Costs (s)

0

5

10

15

20

25

30

35

40

45

50

0 500 1000 1500 2000 2500 3000 3500 4000 4500

Time

Nu

mb

er o

f st

ates

k=0, s=5 k=0, s=3 k=0, s=2 k=0, s=1 k=0, s=0.5

CHANGES IN REVENUE DUE TO POPULATION

Number of States with Varying Population

0

5

10

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45

50

0 500 1000 1500 2000 2500 3000 3500 4000 4500

Time

Nu

mb

er

of

sta

tes

No population growth Population growing at 0.05 percent Population growing at 0.1 percent

CHANGES IN REVENUE DUE TO ASSET TYPE

Number of States with Different Levels of Capital Mobility(Tax rate of 25 percent)

0

5

10

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20

25

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0 500 1000 1500 2000 2500 3000 3500 4000 4500

Time

Nu

mb

er o

f st

ates

No capital mobility (specificity parameter = 1) Low levels of capital mobility (specificity parameter = 0.7) Complete capital mobility (specificity parameter = 0.0)

Figure 13.B. Complete capital mobility in the core

CENTRAL INSIGHTS

The size of states increases (and their number decreases) as war technologies become capital-intensive.

Wealth is a central factor driving state formation. In scarcely populated, technologically underdeveloped areas the number of states remains high. Rulers have little incentive to expand. Unification does not happen.

To explain variance in state size we need to consider the type of wealth of each country. Countries are smaller (larger) in capital-rich (capital-poor) economies.

War does not take place among mobile capital states.

Internalizing the costs of war to rulers (democracy) reduces war and state size.

ADVANCING THEORY

The purpose of the paper is to advance research in comparative politics, primarily.

But we are also interested in current IR theory:

We suggest a way to endogenize the number of states in the international system:

… where we preserve the assumption of anarchy as the organizing principle & of the search for power as the driving force of all states,

while specifying basic conditions at the international and domestic level that explain a wide variety of outcomes (clusters of peace-keeping nations, periods of war, etc.)