Government instability (cabinet duration) is an important feature of parliamentary democracy. Over time, the research on cabinet duration has improved in technical and theoretical sophistication. However, we note that little attention has been paid to the relationship between governments and the state itself. Our main hypothesis is that state capacity, e.g., factors such as state bureaucratic effectiveness and law and order, shape how easy it is for governments to implement the new policy and thus how well they can achieve policy objectives. We also argue that when state capacity is low, the ability to adequately respond to external shocks goes down, and instability increases. When testing this empirically we find that low state capacity does indeed help us predict an increased risk for early termination—in particular, whether the government ends through a replacement (but not by an early election). Using interaction effects, we also demonstrate that the effect of external shocks, such as an increase in unemployment, is conditional on state capacity. An increase in unemployment only has a significant effect on cabinet stability when state capacity is low, suggesting that the cabinet’s (in)ability to address the economic problems is an important factor for understating cabinet durability.