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Standardizing the fiscal state: cabal tax farming as an Intermediate Institution in early-modern England and France

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  • Noel D., Johnson
  • Mark, Koyama

Abstract

How did modern and centralized fiscal institutions emerge? We develop a model that explains (i) why pre-industrial states relied on private individuals to collect taxes; (ii) why after 1600 both England and France moved from competitive methods for collecting revenues to allocating the right to collect taxes to a small group of financiers—a intermediate institution that we call cabal tax farming—and (iii) why this centralization led to investments in fiscal capacity and increased fiscal standardization. We provide detailed historical evidence that supports our prediction that rulers abandoned the competitive allocation of tax rights in favor of cabal tax farming in order to gain access to inside credit and that this transition was accompanied by investments in standardization. Finally (iv) we show why this intermediate institution proved to be self-undermining in England where it was quickly replaced by direct collection, but lasted in France until the French Revolution.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40403.

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Date of creation: 31 Jul 2012
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Handle: RePEc:pra:mprapa:40403

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Keywords: State Capacity; Standardization; Tax Farming; France; England; Transaction Costs;

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Cited by:
  1. Johnson, Noel D & Koyama, Mark, 2012. "Legal Centralization and the Birth of the Secular State," MPRA Paper 40887, University Library of Munich, Germany.
  2. Anderson, R. Warren & Johnson, Noel D & Koyama, Mark, 2013. "From the Persecuting to the Protective State? Jewish Expulsions and Weather Shocks from 1100 to 1800," MPRA Paper 44228, University Library of Munich, Germany.

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