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This paper challenges the long-standing belief that changes in patterns of war and war making caused the emergence of large territorial states. Using new data describing the universe of European states between 1100 and 1790, I find that small political units continued to thrive well into the “age of the territorial state.” Some scholars have argued that changes in the production of violence led to the dominance of geographically large political units during this era. In contrast, I find evidence that variation in patterns of economic development and urban growth caused fragmented political authority in some places and the construction of geographically large territorial states in others. Exploiting random climatic deviations in the propensity of certain geographical areas to support large populations, I show via an instrumental-variables approach that the emergence of towns and cities caused the formation of small and independent states. For the nearly forty years since the publication of The Formation of National States in Western Europe questions of the territorial state’s origin have aroused the interest of scholars spanning the social sciences.1 Yet despite extensive scholarship on the topic, there has been little work aimed at explicitly evaluating the hypotheses generated by theories of state formation.2 Bringing to bear new data describing the entire universe of European states, I fill this gap by explaining variation in the number and size of states between 1100 and 1790.3 Scholarship points to two broad factors that, in some combination, are believed to have determined the number and size of states: capital and coercion.4 Variation in access to economic resources, on the one hand, and the ability to produce largescale collective violence, on the other, are thought to have selected large states Thanks to the Columbia-Princeton-Yale Historical Political EconomyWorking Group, Sergio Ascencio, Carles Boix, David Carter, Kosuke Imai, Kris Ramsay, as well as seminar participants at CIDE’s EPEN conference, George Mason Univerity’s Public Choice seminar, and the Politics and History conference at Yale. Thanks to Emily Erickson, Marco Esquandolas, Eric Falcon, MaryClare Roche, and Jennifer Zhao for their research assistance. All errors and omissions are my own. 1. Tilly, 1975. 2. Several attempts have been made using agent-based approaches to examine theories of state formation. For two examples, see Boix, Codenotti, and Resta 2011 and Cederman 1997. 3. The study of modern state formation encompasses social and political processes beyond the number and geographic scale of states. Still, in enumerating outcomes associated with the topic, Tilly asks first: “What accounts for the roughly concentric pattern of state-formation in Europe as a whole, with large but thinly controlled states forming early around the periphery, smaller but more tightly governed states grouped in a rough intermediate zone, and a central band of city-states, principalities, federations, and other varieties of intensely fragmented sovereignty that only after 1790 consolidate into larger states?” (Tilly 1990, 32). 4. Tilly 1990. International Organization 71, Winter 2017, pp. 97–130 © The IO Foundation, 2016 doi:10.1017/S0020818316000308 h t t p s : / / d o i . o r g / 1 0 . 1 0 1 7 / S 0 0 2 0 8 1 8 3 1 6 0 0 0 3 0 8 D o w n l o a d e d f r o m h t t p s : / / w w w . c a m b r i d g e . o r g / c o r e . A c c e s s p a i d b y t h e U C S a n D i e g o L i b r a r y , o n 0 9 J a n 2 0 1 8 a t 0 6 : 0 3 : 1 2 , s u b j e c t t o t h e C a m b r i d g e C o r e t e r m s o f u s e , a v a i l a b l e a t h t t p s : / / w w w . c a m b r i d g e . o r g / c o r e / t e r m s .