The Economic Origins of the Territorial State

This paper challenges the long-standing belief that changes in patterns of war and war making caused the emergence of large territorial states. Using new data describing the universe of European states between 1100 and 1790, I find that small political units continued to thrive well into the “age of the territorial state.” Some scholars have argued that changes in the production of violence led to the dominance of geographically large political units during this era. In contrast, I find evidence that variation in patterns of economic development and urban growth caused fragmented political authority in some places and the construction of geographically large territorial states in others. Exploiting random climatic deviations in the propensity of certain geographical areas to support large populations, I show via an instrumental-variables approach that the emergence of towns and cities caused the formation of small and independent states.