Abstract This study presents a new economic perspective on state-building based on a case study in the Democratic Republic of the Congo’s hinterland. We explore the implications for the state of considering rebels as stationary bandits. When the state, through a military operation, made it impossible for rebels to levy taxes, it inadvertently encouraged them to plunder the assets of the very citizens they previously preferred to tax. When it negotiated with rebels instead, this effect was absent, but negotiating compromised the state’s legitimacy and prompted the emergence of new rebels. The findings suggest that attempting to increase taxation by a weak state in the hinterland could come at the expense of safety in the medium term and of the integrity of the state in the long term.

We study the stock market performance of firms with Jewish board members during the “Dreyfus Affair” in 19th century France. In a context of widespread latent antisemitism, initial accusations made against the Jewish officer Alfred Dreyfus led to short-lived abnormal negative returns for Jewish-connected firms. However, investors betting on these firms earned higher returns during the period corresponding to Dreyfus' rehabilitation, starting with the publication of the famous op-ed J'Accuse! in 1898. Our conceptual framework illustrates how diminishing antisemitic biases among investors might plausibly explain these effects. Our paper provides novel insights on how antisemitism can increase and decrease over short periods of time at the highest socio-economic levels in response to certain events, which in turn can affect firm value in financial markets.