This paper shows that higher commodity dependence reduces the government's incentive to invest in fiscal capacity. After developing a model that makes this prediction, evidence is provided supporting the view that countries more dependent on commodities (whose rents can be easily appropriated by...

Existing studies have shown that the state's ability to tax, also known as fiscal capacity, is positively related to economic development. In this paper, we analyze the determinants of the government's decision to invest in state capacity, which involves a trade-off between present consumption...