Although researchers have often considered democracy and state capacity to be key predictors of cross-national variations in human welfare, few have investigated the relationship between the two variables themselves. We argue that democratization may have a positive, causal effect on state capacity. Employing a time-series cross-national dataset from 1960 to 2009, we document that democratization leads to a substantial increase in state capacity in the long run. Our results prove robust to a rich set of potential confounders and alternative coding of key variables. To further address the problem of endogeneity, we use an instrumental variable strategy that exploits exogenous variations in regional democratic diffusions. We also provide suggestive evidence that democratization enhances state capacity through increasing political contestation.
— Awarded the 2015 Malcolm Jewell Award for the best graduate student paper presented at the SPSA annual meeting.