The Origins of the State: Technology, Cooperation and Institutions

espite the vast evidence on the economic relevance of the state's institutional capacity to provide public goods and incentivize risk-sharing and innovation, we lack an organic and empirically sound theory of its origins. To help fill this gap, we develop a theory of state formation shedding light on the rise of the first stable state institutions in Bronze Age Mesopotamia. Our analysis suggests that the mix of adverse production conditions and unforeseen innovations pushed groups favored by old technologies to establish the state by granting political and property rights to powerless individuals endowed with new and complementary skills. Through these reforms, the elite convinced the nonelite that a sufficient part of the returns on joint investments would be shared via public spending and, thus, to cooperate and accumulate a culture of cooperation. Different from alternative theories, we stress that: 1) group formation is heavily shaped by unforeseen shocks to the returns on risk-sharing and innovation; 2) complementarity in group-specific skills is key determinant of state formation; 3) military, merchant and, especially, religious ranks favored reforms towards stronger nonelites' rights and the spread of a culture of cooperation; 4) access to violence is not a crucial institutional engine.