State capacity and the post office: Evidence from nineteenth century Quebec

The theory of state capacity predicts that states with powerful abilities – as long as they are constrained – can promote economic growth. Many scholars argue that post offices historically approximate state capacity and that they can be used to evaluate the state’s ability to promote development. We contest this relationship using Canadian evidence. Using a difference-in-differences method to estimate the effect of gaining a post office on the value of agricultural output per acre between 1831 and 1861, we find no treatment effect. We point out this is likely due to state capacity expansion crowding out efficient private operators.