1. War, Wealth and the Formation of States * Carles Boix, Bruno Codenotti and Giovanni Resta * Prepared for 2006 IPES Meeting.

2. 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

3. 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.

4. DECISION RULES OF STATE (1)

5. DECISION RULES OF STATE (2)

6. 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

7. SIMULATION ENVIRONMENT

8. CHANGES IN VARIABLE COSTS

9. CHANGES IN REVENUE DUE TO POPULATION

10. CHANGES IN REVENUE DUE TO ASSET TYPE

13. 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.

14. 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.)