The Impact of Independence-War Dynamics on Post-Independence Fiscal Capacity: Evidence from Spanish America

The wars of independence in Spanish America led to the creation of a myriad of independent states. Even though the region had been part of a unified empire which kept power centralized in the metropolis, the nascent states showed variation in their capacity to tax and distribution of fiscal faculties between the new capital cities and the regions. What factors explain the variation in the degree of fiscal capacity of the newly minted states? We analyze the impact of colonial fiscal legacies and the dynamics of the independence wars, or lack thereof, on fiscal outcomes. Despite sharing a common Imperial structure, the colonial fiscal legacy and the dynamics of armed conflict varied across the region. We analyze original data from a country-year panel of the 22 present-day states in Spanish America during the first 50 years of independent rule. Our preliminary research suggests that when command-centralized insurgents played a role in achieving independence, they were more successful in establishing control at the national level at the outset regardless of the initial distribution of economic and political assets. This project complements the literature on state building in Latin America that underscores the role of internal conflict in hindering the extractive capacity of the state. By incorporating the dynamics of conflict we account better for the variation in fiscal capacity outcomes across Spanish America. Understanding the origins of territorial fiscal structures and their link to the independence war dynamics may provide new insights on the sources of post-independence political instability.