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Credible Commitment in Early Modern Europe: North and Weingast Revisited

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  • David Stasavage

Abstract

This article proposes a revision to existing arguments that institutions of limited government (characterized by multiple veto points) improve the ability of governments to credibly commit. Focusing on the issue of sovereign indebtedness, I present a simple framework for analyzing credibility problems in an economy divided between owners of land and owners of capital. I then argue that establishing multiple veto points can improve credibility, but whether this takes place depends upon the structure of partisan interests in a society, on the existence of cross-issue coalitions, and on the extent to which management of government debt is delegated. I develop several propositions to take account of these factors and evaluate them with historical evidence from eighteenth century England and France. The results show that incorporating these additional factors can help to explain a broader range of phenomena than is accounted for in existing studies. Copyright 2002, Oxford University Press.

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  • David Stasavage, 2002. "Credible Commitment in Early Modern Europe: North and Weingast Revisited," Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(1), pages 155-186, April.
  • Handle: RePEc:oup:jleorg:v:18:y:2002:i:1:p:155-186
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    2. Barry Eichengreen, 2013. "ADB Distinguished Lecture Renminbi Internationalization: Tempest in a Teapot?," Asian Development Review, MIT Press, vol. 30(1), pages 148-164, March.
    3. Luis Corchón, 2008. "Forms of governance and the size of rent-seeking," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(2), pages 197-210, February.
    4. Andrianova, Svetlana & Demetriades, Panicos & Xu, Chenggang, 2011. "Political Economy Origins of Financial Markets in Europe and Asia," World Development, Elsevier, vol. 39(5), pages 686-699, May.
    5. repec:eee:exehis:v:64:y:2017:i:c:p:1-20 is not listed on IDEAS
    6. Mikael Priks, 2005. "Optimal Rent Extraction in Pre-Industrial England and France – Default Risk and Monitoring Costs," CESifo Working Paper Series 1464, CESifo Group Munich.
    7. Noel D., Johnson & Mark, Koyama, 2012. "Standardizing the fiscal state: cabal tax farming as an Intermediate Institution in early-modern England and France," MPRA Paper 40403, University Library of Munich, Germany.
    8. repec:eee:jbrese:v:85:y:2018:i:c:p:60-72 is not listed on IDEAS
    9. Kai A. Konrad & Thomas R. Cusack, 2013. "Hanging Together or Being Hung Separately: The Strategic Power of Coalitions where Bargaining Occurs with Incomplete Information," CESifo Working Paper Series 4071, CESifo Group Munich.
    10. Broadberry, Stephen & Gardner, Leigh, 2013. "Africa's Growth Prospects in a European mirror: a Historical Perspective," CAGE Online Working Paper Series 172, Competitive Advantage in the Global Economy (CAGE).
    11. Stephen Quinn, 2008. "Securitization of Sovereign Debt: Corporations as a Sovereign Debt Restructuring Mechanism in Britain, 1694-1750," Working Papers 200701, Texas Christian University, Department of Economics.
    12. Boubakri, Narjess & El Ghoul, Sadok & Saffar, Walid, 2015. "Firm growth and political institutions," Journal of Multinational Financial Management, Elsevier, vol. 31(C), pages 104-125.
    13. Hamilton-Hart, Natasha, 2017. "The Legal Environment and Incentives for Change in Property Rights Institutions," World Development, Elsevier, vol. 92(C), pages 167-176.
    14. Seghezza, Elena, 2015. "Fiscal capacity and the risk of sovereign debt after the Glorious Revolution: A reinterpretation of the North–Weingast hypothesis," European Journal of Political Economy, Elsevier, vol. 38(C), pages 71-81.
    15. Johnson, Noel D. & Koyama, Mark, 2014. "Tax farming and the origins of state capacity in England and France," Explorations in Economic History, Elsevier, vol. 51(C), pages 1-20.
    16. Timur Kuran & Jared Rubin, 2014. "The Financial Power of the Powerless: Socio-Economic Status and Interest Rates under Partial Rule of Law," Working Papers 14-22, Chapman University, Economic Science Institute.
    17. Gary B. Gorton, 2016. "The History and Economics of Safe Assets," NBER Working Papers 22210, National Bureau of Economic Research, Inc.
    18. Nikolova, Elena & Nikolova, Milena, 2017. "Suffrage, labour markets and coalitions in colonial Virginia," European Journal of Political Economy, Elsevier, vol. 49(C), pages 108-122.
    19. Stephen Weymouth & J. Lawrence Broz, 2013. "Government Partisanship and Property Rights: Cross-Country Firm-Level Evidence," Economics and Politics, Wiley Blackwell, vol. 25(2), pages 229-256, July.
    20. Broadberry, Stephen & Gardner, Leigh, 2014. "African economic growth in a European mirror: a historical perspective," Economic History Working Papers 56493, London School of Economics and Political Science, Department of Economic History.
    21. Ogilvie, Sheilagh & Carus, A.W., 2014. "Institutions and Economic Growth in Historical Perspective," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 8, pages 403-513 Elsevier.
    22. Keefer, Philip & Knack, Stephen, 2002. "Boondoogles and expropriation : rent-sseking and policy distortion when property rights are insecure," Policy Research Working Paper Series 2910, The World Bank.
    23. Tamer Cetin & Yildirim B. Cicen & Kadir Y. Eryigit, 2016. "Do Institutions Matter for Economic Performance? Theoretical Insights and Evidence from Turkey," Koç University-TUSIAD Economic Research Forum Working Papers 1610, Koc University-TUSIAD Economic Research Forum.
    24. Haggard Stephan & Zheng Yu, 2013. "Institutional innovation and investment in Taiwan: the micro-foundations of the developmental state," Business and Politics, De Gruyter, vol. 15(4), pages 435-466, December.

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