ABSTRACT
This chapter critically reviews the literature on the role of the state in economic development. This falls into two schools, the economic and political. The limitations of the economic school include the limited scope of analysis, the lack of a political economy, and the importance of complementarity.Weaknesses of the political school include the limited analysis of the state’s role, the relation between different theories, and lack of dynamics. A number of efforts have emerged to integrate these two schools and these are reviewed here. The following theoretical section attempts an integration relevant for the empirical context outlined in Chapter 3, focusing specifically on the role of the state. The financial role of the state is in allocating the economic surplus to those able to invest productively. The production role of the state is to ensure financial resources so allocated are used productively, to either raise productivity in an existing market niche (learning) or upgrade to a higher-technology market niche. The final section looks at how institutions can mediate the relationship between conflict and economic growth. The existing literature looking at this relationship is very limited. In this book a broader institutional perspective is considered. A repressive state, an inclusive state or an ideological state can help reduce the negative implications of conflict on development.
