Rock, scissors, paper: the problem of incentives and information in traditional Chinese state and the origin of Great Divergence
AbstractThis 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.
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Bibliographic InfoPaper provided by London School of Economics and Political Science, Department of Economic History in its series Economic History Working Papers with number 37569.
Length: 57 pages
Date of creation: Jul 2011
Date of revision:
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Find related papers by JEL classification:
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
- N0 - Economic History - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-02 (All new papers)
- NEP-DEV-2011-08-02 (Development)
- NEP-HIS-2011-08-02 (Business, Economic & Financial History)
- NEP-HME-2011-08-02 (Heterodox Microeconomics)
- NEP-TRA-2011-08-02 (Transition Economics)
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