Taxation and Public Goods Provision in China and Japan before 1850
AbstractWe develop a principal-agent model to study fiscal capacity in pre-modern China and Japan. Before 1850, both nations were ruled by stable dictators who relied on bureaucrats to govern their domains. We hypothesize that agency problems increase with the eographic size of a domain. In a large domain, the ruler's inability to closely monitor bureaucrats creates opportunities for the bureaucrats to exploit taxpayers. To prevent overexploitation, the ruler has to keep taxes low and government small. Our dynamic model shows that while economic expansion improves the ruler's finances in a small domain, it could lead to lower tax revenues in a large domain as it exacerbates bureaucratic expropriation. To test these implications, we assemble comparable quantitative data from primary and secondary sources. We find that the state taxed less and provided fewer local public goods per capita in China than in Japan. Furthermore, while the Tokugawa shogunate's tax revenue grew in tandem with demographic trends, Qing China underwent fiscal contraction after 1750 despite demographic expansion. We conjecture that a greater state capacity might have prepared Japan better for the arrival of the West after 1850.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series PRIMCED Discussion Paper Series with number 35.
Length: 41 p.
Date of creation: Feb 2013
Date of revision:
Comparative Institutional Analysis; Principal-Agent Problem; Dictatorships;
Other versions of this item:
- Tuan-Hwee Sng & Chiaki Moriguchi, 2013. "Taxation and Public Goods Provision in China and Japan before 1850," Global COE Hi-Stat Discussion Paper Series gd12-284, Institute of Economic Research, Hitotsubashi University.
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
- N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
- P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-HIS-2013-03-16 (Business, Economic & Financial History)
- NEP-PUB-2013-03-16 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carol H. Shiue & Wolfgang Keller, 2007.
"Markets in China and Europe on the Eve of the Industrial Revolution,"
American Economic Review,
American Economic Association, vol. 97(4), pages 1189-1216, September.
- Carol H. Shiue & Wolfgang Keller, 2004. "Markets in China and Europe on the Eve of the Industrial Revolution," NBER Working Papers 10778, National Bureau of Economic Research, Inc.
- Keller, Wolfgang & Shiue, Carol Hua, 2004. "Markets in China and Europe on the Eve of the Industrial Revolution," CEPR Discussion Papers 4420, C.E.P.R. Discussion Papers.
- Kandori, Michihiro, 1992.
"Social Norms and Community Enforcement,"
Review of Economic Studies,
Wiley Blackwell, vol. 59(1), pages 63-80, January.
- Daron Acemoglu, 2005.
"Politics and Economics in Weak and Strong States,"
NBER Working Papers
11275, National Bureau of Economic Research, Inc.
- KentG. Deng, 2008. "Miracle Or Mirage? Foreign Silver, China'S Economy And Globalization From The Sixteenth To The Nineteenth Centuries," Pacific Economic Review, Wiley Blackwell, vol. 13(3), pages 320-357, 08.
- Timothy Besley & Torsten Persson, 2007.
"The Origins of State Capacity: Property Rights, Taxation, and Politics,"
NBER Working Papers
13028, National Bureau of Economic Research, Inc.
- Timothy Besley & Torsten Persson, 2009. "The Origins of State Capacity: Property Rights, Taxation, and Politics," American Economic Review, American Economic Association, vol. 99(4), pages 1218-44, September.
- Besley, Timothy J. & Persson, Torsten, 2007. "The Origins of State Capacity: Property Rights, Taxation, and Politics," CEPR Discussion Papers 6370, C.E.P.R. Discussion Papers.
- Alberto Alesina & Enrico Spolaore, 1995.
"On the Number and Size of Nations,"
NBER Working Papers
5050, National Bureau of Economic Research, Inc.
- Olsson, Ola & Hansson, Gustav, 2011.
"Country size and the rule of law: Resuscitating Montesquieu,"
European Economic Review,
Elsevier, vol. 55(5), pages 613-629, June.
- Gustav Hansson & Ola Olsson, 2006. "Country Size and the Rule of Law: Resuscitating Montesquieu," DEGIT Conference Papers c011_033, DEGIT, Dynamics, Economic Growth, and International Trade.
- Hansson, Gustav & Olsson, Ola, 2006. "Country Size and the Rule of Law: Resuscitating Montesquieu," Working Papers in Economics 200, University of Gothenburg, Department of Economics.
- Rosenthal, Jean-Laurent & Wong, R. Bin, 2011. "Before and Beyond Divergence: The Politics of Economic Change in China and Europe," Economics Books, Harvard University Press, number 9780674057913, December.
- Shawn Ni & Pham Hoang Van, 2005.
"High Corruption Income in Ming and Qing China,"
0503, Department of Economics, University of Missouri.
- Greif, Avner, 1998. "Historical and Comparative Institutional Analysis," American Economic Review, American Economic Association, vol. 88(2), pages 80-84, May.
- Carl Mosk, 2011. "TRAPS EMBRACED OR ESCAPED:Elites in the Economic Development of Modern Japan and China," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 7465.
- Usher, Dan, 1989.
"The Dynastic Cycle and the Stationary State,"
American Economic Review,
American Economic Association, vol. 79(5), pages 1031-44, December.
- Masaki Nakabayashi, 2008. "Rise of the Japanese fiscal state," Discussion Papers in Economics and Business 08-12, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Koji Sakaguchi).
If references are entirely missing, you can add them using this form.