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

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  • Debin Ma

    (London School of Economics)

Abstract

"Using a newly reconstructed data series of two and a half millennia on Chinese warfare and durations of political unification and fragmentation, this article provides a re-interpretation of the traditional Chinese political regime from the perspective of institutional economics. Structured within a principal-agent model with three major actors - the emperor, the bureaucracy and the people - the article demonstrates that monopoly rule, a long time-horizon and the large size of the empire could lead an absolutist regime like imperial China towards a path of low-taxation, dynastic stability and extensive growth. But fundamental incentive misalignment and information asymmetry problem embedded in its centralized and hierarchical political structure also significantly weakened the regime’ fiscal and financial capacity to support institutions and institutional change conducive to modern economic growth. Using comparable series of fiscal revenue, the paper makes some comparisons between Imperial Qing (1644-1911) and contemporaneous Western Europe."

Suggested Citation

  • Debin Ma, 2011. "Rock, scissors: the problem of incentives and information in the traditional China state and the origin of the Great Divergence," Working Papers 11002, Economic History Society.
    • Handle: RePEc:ehs:wpaper:11002
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    References listed on IDEAS

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    Cited by:

    1. Loren Brandt & Debin Ma & Thomas G. Rawski, 2014. "From Divergence to Convergence: Reevaluating the History behind China's Economic Boom," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 45-123, March.
    2. Sng, Tuan-Hwee, 2014. "Size and dynastic decline: The principal-agent problem in late imperial China, 1700–1850," Explorations in Economic History, Elsevier, vol. 54(C), pages 107-127.

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