Agrarian Elites, Wealth Inequality, and State Capacity: Evidence from Early Twentieth-Century Brazil

abstract: Traditional agrarian elites have often been portrayed as obstacles to the expansion of the state. Because landed actors are particularly exposed to taxation, inequality is expected to exacerbate their resistance to the development of fiscal capacity. This article argues that when propertied actors are politically dominant and obtain benefits from public spending that are proportional to their capital endowments, wealth inequality is associated with greater elite support for capacity investments. Using early twentieth-century Brazilian data, the author shows that where landed elites faced fewer political threats, higher levels of landholding concentration were associated with increased fiscal and administrative capacity. Tests of mechanisms corroborate the idea that this relationship results from elite demands for specific types of public spending. These findings contribute to the broader literature on state-building by providing new insights into the interaction between economic interests and political dominance in shaping subnational variation in the reach of the state.