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The paradox of power: principal-agent problems and administrative capacity in Imperial China (and other absolutist regimes)

Ma, Debin and Rubin, Jared (2019) The paradox of power: principal-agent problems and administrative capacity in Imperial China (and other absolutist regimes). Journal of Comparative Economics, 47 (2). pp. 277-294. ISSN 0147-5967

[img] Text (Ma and Rubin - changes accepted 2019) - Accepted Version
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Identification Number: 10.1016/j.jce.2019.03.002

Abstract

Tax extraction is often low in absolutist regimes. Why are absolutists unable to convert power into revenue? Supported by evidence from Imperial China, we explain this puzzle with a principal-agent model which reveals that absolutists, unconstrained by rule of law and unable to commit to not predating on their tax-collecting agents (and the masses), may find it optimal to settle for a low wage-low tax equilibrium, while permitting agents to keep extra, unmonitored taxes. Our analysis suggests that low investment in administrative capacity is a conscious choice for an absolutist since it substitutes for credible commitment to refrain from confiscation from its agents.

Item Type: Article
Additional Information: © 2019 Association for Comparative Economic Studies
Divisions: Economic History
Subjects: H Social Sciences > HJ Public Finance
J Political Science > JA Political science (General)
J Political Science > JQ Political institutions Asia
J Political Science > JN Political institutions (Europe)
JEL classification: N - Economic History > N4 - Government, War, Law, and Regulation > N45 - Asia including Middle East
N - Economic History > N4 - Government, War, Law, and Regulation > N43 - Europe: Pre-1913
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General
P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy; Legal Institutions; Property Rights
P - Economic Systems > P5 - Comparative Economic Systems > P51 - Comparative Analysis of Economic Systems
Date Deposited: 26 Mar 2019 15:30
Last Modified: 18 Jun 2019 23:07
URI: http://eprints.lse.ac.uk/id/eprint/100296

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