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Rock, scissors, paper: the problem of incentives and information in traditional Chinese state and the origin of Great Divergence

Ma, Debin (2011) Rock, scissors, paper: the problem of incentives and information in traditional Chinese state and the origin of Great Divergence. Economic history working papers, 152/11. London School of Economics, London, UK.

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Abstract

This article posits that the political institution of imperial China – its unitary and centralized ruling structure – is an essential determinant to China‘s long-run economic trajectory and its early modern divergence from Western Europe. Drawing on institutional economics, I demonstrate that monopoly rule, a long time-horizon and the large size of the empire could give rise to a path of low-taxation and dynastic stability in imperial China. But fundamental incentive misalignment and information asymmetry problems within its centralized and hierarchical political structure also constrained the development the fiscal and financial capacity of the Chinese state. Based on a reconstruction of two millennia records of incidences of warfare, this paper develops a narrative to show that the establishment and consolidation towards a single unitary monopoly of political power was an endogenous historical process. Using data series on warfare and government revenue for 17-19th century, I illustrate the Qing imperial rule as an epitome of the traditional Chinese political economy.

Item Type: Monograph (Working Paper)
Additional Information: © 2011 The Author, LSE
Library of Congress subject classification: D History General and Old World > DS Asia
H Social Sciences > HC Economic History and Conditions
Journal of Economic Literature Classification System: N - Economic History > N9 - Regional and Urban History > N95 - Asia including Middle East
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
Sets: Departments > Economic History
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 152/11
Date Deposited: 25 Jul 2011 09:54
URL: http://eprints.lse.ac.uk/37569/

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