Trade and the Origins of the Territorial State

Résumé

How do states, and state borders, emerge? This paper studies the emergence of territorial states in Eastern Europe during the ninth and tenth century AD, during a time when previously tribal areas were penetrated by a long-distance trade of slaves against Islamic silver coins. Slaves were taken by Rus and other tribes in Eastern Europe, and transported via a network of rivers to trading entrepots in Khazaria and Volga Bulgaria, where they were traded against silver coins with Arab merchants. I show that increases in market access to Arab silver led to an increased likelihood in the formation of territorial states. I present a quantitative model of territorial choice in the presence of inter-regional trade, which provides opportunities for taxation. I estimate the model using data on coin finds, which inform the location of trade flows, and using the observed territorial boundary of the first Polish state under the Piast dynasty. The estimates reveal that trade shaped the borders of the Polish state alongside other strategic concerns. Toll revenues accounted for only a relatively small share of fiscal revenues, but because they came in the form of silver and were therefore suitable to pay soldiers, allowed the Piasts to build up their coercive capacity. This led to further revenues through taxation and plunder.