This is one of the best political economy papers I have read in some time:
The absence of state capacities to raise revenue and to support markets is a key factor in explaining the persistence of weak states. This paper reports on an on-going project to investigate the incentive to invest in such capacities. The paper sets out a simple analytical structure in which state capacities are modeled as forward looking investments by government. The approach highlights some determinants of state building including the risk of external or internal con‡flict, the degree of political instability, and dependence on natural resources. Throughout, we link these state capacity investments to patterns of development and growth.
It is by Tim Besley and Torsten Persson. I agree with the core predictions, but I do not think they are are necessarily going to be true. More on this in a few weeks.