Despite the vast evidence on the relevance of the state's institutional capacity to provide public goods, enforce contracts and properly protect property rights, we still lack an organic and empirically sound framework to understand its origins and impact. To help fill this gap, we propose to construct and analyze, through an innovative mix of methodologies borrowed from archaeology, Assyriology, economics, history, law, and political science, a novel data set on the first stable state institutions recorded in 44 major Mesopotamian polities between 3050 and 1750 BCE. Different from similar databases on medieval and modern societies, this data set is not only unaffected by the confounding impact of the European colonization but also displays large and detailed panel variation on economies sufficiently simple to credibly link economic incentives to institutional evolution. Our testable predictions originate from the idea that adverse production conditions push elites lacking the ability to commit to future transfers to share their decision-making power with nonelites endowed with complementary skills to convince them that a sufficient part of the returns on joint investments will be shared via public good provision. These reforms encourage cooperation. First, we will assess if negative production shocks also determined—through the adoption of a more inclusive political process—the state's fiscal capacity, intended as the elites’ ability to elicit the nonelites’ cooperation via the provision of valuable public goods. Different from the extant literature, we will capture the state’s fiscal capacity with measures of the inclusiveness of the fiscal policy design rather than the unobserved tax revenues and we will consider its exogenous geographic determinants. This subproject will unmask the technological forces that can drive the endogenous formation of the fiscal order in those developing, and especially most agricultural, countries where institutional transplantation has failed. Second, we will evaluate if reforms towards a more inclusive political process and/or a fall in preference heterogeneity, which we will capture with a smaller degree of ethnolinguistic diversity of the population, induced reforms towards a centralized legal order, i.e., a passage from judge-made law to statute law together with a shift from property rules to liability rules. To expunge the endogenous component of these institutional arrangements, we will rely on the exogenous components of their determinants, which are the farming return for the inclusiveness of the political process and the distance to the technological frontier, which we will capture with
Despite the vast evidence on the relevance of the state's institutional capacity to provide public goods, enforce contracts and properly protect property rights, we still lack an organic and empirically sound framework to understand its origins and impact. To help fill this gap, we propose to construct and analyze, through an innovative mix of methodologies borrowed from archaeology, Assyriology, economics, history, law, and political science, a novel data set on the first stable state institutions recorded in 44 major Mesopotamian polities between 3050 and 1750 BCE. Different from similar databases on medieval and modern societies, this data set is not only unaffected by the confounding impact of the European colonization but also displays large and detailed panel variation on economies sufficiently simple to credibly link economic incentives to institutional evolution. Our testable predictions originate from the idea that adverse production conditions push elites lacking the ability to commit to future transfers to share their decision-making power with nonelites endowed with complementary skills to convince them that a sufficient part of the returns on joint investments will be shared via public good provision. These reforms encourage cooperation.