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A Model of a Predatory State

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    Abstract

    We provide a model of a primitive state whose rulers extort taxes for their own ends. This 'predatory' state can result in lower levels of both output and popular welfare than either organized banditry or anarchy. The predatory state may provide public goods, such as protection or irrigation, and hence may superficially resemble a contractual state. But, the ability to provide such goods can actually reduce popular welfare after allowing for tax changes. We compare the revenues raised by taxation with those from banditry to get an idea when primitive states are likely to emerge. We then consider interactions between bandits and the state. 'Corrupt' side-deals are bad for output and popular welfare, but good for revenue. Even in the absence of such collusion, the existence of a 'mafia' and of the state can be good for each other. Competition between organized crime and the state, however, typically reduces popular welfare and pushes the volume of banditry close to its anarchy level. Finally, we extend the basic model to allow the populace to form expectations of tax set by a long-lived king. Our relatively pessimistic conclusions about predatory states extend to this dynamic setting.

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    File URL: http://cowles.econ.yale.edu/P/cd/d11b/d1158.pdf
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    Bibliographic Info

    Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1158.

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    Length: 45 pages
    Date of creation: Aug 1997
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    Publication status: Published in Journal of Law, Economics and Organization (2001), 17(1): 1-33
    Handle: RePEc:cwl:cwldpp:1158

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    1. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-88, December.
    2. Garfinkel, Michelle R, 1990. "Arming as a Strategic Investment in a Cooperative Equilibrium," American Economic Review, American Economic Association, vol. 80(1), pages 50-68, March.
    3. Dan Usher, 1986. "The Dynastic Cycle and the Stationary State," Working Papers 671, Queen's University, Department of Economics.
    4. Furlong, William J., 1987. "A general equilibrium model of crime commission and prevention," Journal of Public Economics, Elsevier, vol. 34(1), pages 87-103, October.
    5. Jack Hirshleifer, 1991. "The Paradox Of Power," Economics and Politics, Wiley Blackwell, vol. 3(3), pages 177-200, November.
    6. Grossman, Herschel I., 1995. "Robin hood and the redistribution of property income," European Journal of Political Economy, Elsevier, vol. 11(3), pages 399-410, September.
    7. Grossman, Herschel I, 1994. "Production, Appropriation, and Land Reform," American Economic Review, American Economic Association, vol. 84(3), pages 705-12, June.
    8. Lane, Frederic C., 1958. "Economic Consequences of Organized Violence," The Journal of Economic History, Cambridge University Press, vol. 18(04), pages 401-417, December.
    9. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September.
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    Cited by:
    1. Herschel I. Grossman, 1997. ""Make Us a King": Anarchy, Predation, and the State," NBER Working Papers 6289, National Bureau of Economic Research, Inc.

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