Taxation and Public Goods Provision in China and Japan before 1850
We 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.
|Date of creation:||Feb 2013|
|Date of revision:|
|Contact details of provider:|| Postal: 2-1 Naka, Kunitachi City, Tokyo 186|
Web page: http://www.ier.hit-u.ac.jp/
More information through EDIRC
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.:
- 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.
- 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.
- 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.
- 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, August.
- Timothy Besley & Torsten Persson, 2009.
"The origins of state capacity: property rights, taxation and politics,"
LSE Research Online Documents on Economics
33768, London School of Economics and Political Science, LSE Library.
- 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.
- 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.
- 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.
- Shawn Ni & Pham Hoang Van, 2005.
"High Corruption Income in Ming and Qing China,"
0503, Department of Economics, University of Missouri.
- 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.
- Greif, Avner, 1998. "Historical and Comparative Institutional Analysis," American Economic Review, American Economic Association, vol. 88(2), pages 80-84, May.
- 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).
- 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.
- Dan Usher, 1986.
"The Dynastic Cycle and the Stationary State,"
671, Queen's University, Department of Economics.
- Alberto Alesina & Enrico Spolaore, 1997.
"On the Number and Size of Nations,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(4), pages 1027-1056.
- Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
- 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.
- Acemoglu, Daron, 2005.
"Politics and economics in weak and strong states,"
Journal of Monetary Economics,
Elsevier, vol. 52(7), pages 1199-1226, October.
When requesting a correction, please mention this item's handle: RePEc:hit:primdp:35. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Digital Resources Section, Hitotsubashi University Library)
If references are entirely missing, you can add them using this form.