Labor Coercion and State Capacity: Evidence from Colonial Indonesia
Abstract: Fiscal modernization is key for long-run economic development. What then enables fiscal modernization? This is the first study to estimate the effect of state capacity expansion on labor coercion as taxation, a practice known as corvée labor. To do so, I construct a new database covering eighteen Javanese provinces over thirty-two years (1874-1905) during the period of Dutch colonial rule. I document the importance of corvée labor and find that national-level policy centralized state finances by gradually replacing corvée with a poll tax. At the same time, however, local state capacity expansion, primarily indigenous officials working as agents for the state, slowed the movement away from corvée. The relationship between state capacity expansion and fiscal modernization therefore depends on what part of the state is expanding. Opposing interests of different state actors can be key in understanding fiscal modernization and public labor coercion, so it is imperative to break open the black box of state capacity and analyze specific actors within the state.
