Journal
AMERICAN ECONOMIC REVIEW
Volume 105, Issue 8, Pages 2364-2409Publisher
AMER ECONOMIC ASSOC
DOI: 10.1257/aer.20140044
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Funding
- CONICYT/Program Associative Research [SOC 1102]
- ARO MURI [W911NF-12-1-0509]
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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)
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