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The economic costs of sleaze or how replacing samurai with bureaucrats boosted regional growth in Meiji Japan

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  • Katharina Muehlhoff

    () (Department of Economics, University of Mannheim, L7, 3-5, 68131, Mannheim, Germany.)

Abstract

The notion that professional, efficient and non-corrupt bureaucracies foster economic growth is virtually uncontested. In spite of this wide consensus, central questions remain unanswered. Thus, while the harmful effects of dysfunctional administrations are extensively covered in the theoretical literature, little is known about the empirical relevance and the expected costs of insufficient administrative rationalization. And while efficient bureaucracies are considered a key ingredient to institutional performance, the existing research rarely investigates how desirable administrative structures have been implemented in history or which concrete policy measures constitute feasible reform strategies for present-day development countries. The present paper therefore aims at providing empirical evidence to dose this lacuna; to do so, it relies on the case of administrative reforms in the last three decades of the nineteenth century in Meiji Japan. Building on an exceptionally detailed set of official statistics and documentary sources, it constructs a panel of 45 Japanese prefectures and assesses the impact of heterogeneous reform implementation on canonical indicators of economic performance including measures of regional GDP, business activity and financial market development. The central results of the econometric analysis are that delayed administrative rationalization came along with a statistically significant and robust penalty on all development indicators. Moreover, this effect was remarkably persistent over time, as the data show that late-reforming prefectures performed systematically worse than the administrative forerunners until well into the twentieth century.

Suggested Citation

  • Katharina Muehlhoff, 2014. "The economic costs of sleaze or how replacing samurai with bureaucrats boosted regional growth in Meiji Japan," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 8(2), pages 201-239, May.
  • Handle: RePEc:afc:cliome:v:8:y:2014:i:2:p:201-239
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    File URL: http://dx.doi.org/10.1007/s11698-013-0099-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Meiji Japan; Administrative reform; Economic development;

    JEL classification:

    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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