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Asia’s little divergence: state capacity in China and Japan before 1850

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  • Tuan-Hwee Sng

    ()

  • Chiaki Moriguchi

    ()

Abstract

This paper explores the role of state capacity in the comparative economic development of 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 geographical 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 check 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 transition from stagnation to growth. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Tuan-Hwee Sng & Chiaki Moriguchi, 2014. "Asia’s little divergence: state capacity in China and Japan before 1850," Journal of Economic Growth, Springer, vol. 19(4), pages 439-470, December.
  • Handle: RePEc:kap:jecgro:v:19:y:2014:i:4:p:439-470
    DOI: 10.1007/s10887-014-9108-6
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    Cited by:

    1. repec:eee:exehis:v:64:y:2017:i:c:p:1-20 is not listed on IDEAS
    2. Ko, Chiu Yu & Koyama, Mark & Sng, Tuan-Hwee, 2014. "Unified China; Divided Europe," MPRA Paper 60418, University Library of Munich, Germany.
    3. Mitchener, Kris James & Ma, Debin, 2016. "Introduction to the special issue: a new economic history of China," LSE Research Online Documents on Economics 69191, London School of Economics and Political Science, LSE Library.
    4. KOYAMA, Mark & MORIGUCHI, Chiaki & SNG, Tuan-Hwee, 2017. "Geopolitics and Asia’s Little Divergence: State Building in China and Japan After 1850," Discussion paper series HIAS-E-51, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    5. Pei Li & Yi Lu & Tuan-Heww Sng, 2017. "Artificial Administrative Boundaries: Evidence from China," CEH Discussion Papers 09, Centre for Economic History, Research School of Economics, Australian National University.
    6. Yuchtman, Noam, 2017. "Teaching to the tests: An economic analysis of traditional and modern education in late imperial and republican China," Explorations in Economic History, Elsevier, vol. 63(C), pages 70-90.
    7. BASSINO, Jean-Pascal & ENG, Pierre van der, 2016. "Asia's 'Little Divergence' in the 20th Century: Evidence from PPP-based direct estimates of GDP per capita, 1913-1969," Discussion paper series HIAS-E-28, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    8. Ni Yuping & Martin Uebele, 2015. "Size and structure of disaster relief when state capacity is limited: China’s 1823 flood," Working Papers 0083, European Historical Economics Society (EHES).
    9. Koyama, Mark & Xue, Melanie Meng, 2015. "The Literary Inquisition: The Persecution of Intellectuals and Human Capital Accumulation in China," MPRA Paper 62103, University Library of Munich, Germany.
    10. Dincecco, Mark & Wang, Yuhua, 2018. "Internal Conflict, Elite Action, and State Failure: Evidence from China, 1000-1911," MPRA Paper 87777, University Library of Munich, Germany.

    More about this item

    Keywords

    Comparative institutional analysis; Geography; Principal–agent problem; Institutions and growth; D73; N15; N40; O43; P52;

    JEL classification:

    • 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, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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