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

  • Noel D., Johnson
  • Mark, Koyama

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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  1. 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.
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  3. Quinn, Stephen, 2001. "The Glorious Revolution'S Effect On English Private Finance: A Microhistory, 1680 1705," The Journal of Economic History, Cambridge University Press, vol. 61(03), pages 593-615, September.
  4. Nicola Gennaioli & Hans-Joachim Voth, 2013. "State Capacity and Military Conflict," Working Papers 593, Barcelona Graduate School of Economics.
  5. Drelichman, Mauricio & Voth, Hans-Joachim, 2010. "Serial Defaults, Serial Profits: Returns to Sovereign Lending in Habsburg Spain, 1566-1600," Economics working papers mauricio_drelichman-2010-, Vancouver School of Economics, revised 04 Jul 2011.
  6. Dincecco,Mark, 2013. "Political Transformations and Public Finances," Cambridge Books, Cambridge University Press, number 9781107617759.
  7. Dincecco, Mark, 2009. "Fiscal Centralization, Limited Government, and Public Revenues in Europe, 1650–1913," The Journal of Economic History, Cambridge University Press, vol. 69(01), pages 48-103, March.
  8. Robert Ashton, 1956. "Revenue Farming Under The Early Stuarts," Economic History Review, Economic History Society, vol. 8(3), pages 310-322, 04.
  9. Franck, Raphaël & Johnson, Noel D. & Nye, John V.C., 2014. "From internal taxes to national regulation: Evidence from a French wine tax reform at the turn of the twentieth century," Explorations in Economic History, Elsevier, vol. 51(C), pages 77-93.
  10. Quinn, Stephen, 1997. "Goldsmith-Banking: Mutual Acceptance and Interbanker Clearing in Restoration London," Explorations in Economic History, Elsevier, vol. 34(4), pages 411-432, October.
  11. Johnson, Noel D., 2006. "Banking on the King: The Evolution of the Royal Revenue Farms in Old Regime France," The Journal of Economic History, Cambridge University Press, vol. 66(04), pages 963-991, December.
  12. Eugene N. White, 2004. "From privatized to government-administered tax collection: tax farming in eighteenth-century France -super-1 ," Economic History Review, Economic History Society, vol. 57(4), pages 636-663, November.
  13. Maurer, Noel & Gomberg, Andrei, 2004. "When the State is Untrustworthy: Public Finance and Private Banking in Porfirian Mexico," The Journal of Economic History, Cambridge University Press, vol. 64(04), pages 1087-1107, December.
  14. Areendam Chanda & Louis Putterman, 2007. "Early Starts, Reversals and Catch-up in the Process of Economic Development," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 387-413, 06.
  15. Patrick O'Brien, 2001. "Fiscal exceptionalism: Great Britain and its European rivals: from civil war to triumph at Trafalgar and Waterloo," Economic History Working Papers 22369, London School of Economics and Political Science, Department of Economic History.
  16. K. Kivanç Karaman & Sevket Pamuk, 2011. "Different Paths to the Modern State in Europe: The interaction between domestic political economy and interstate competition," LEQS – LSE 'Europe in Question' Discussion Paper Series 37, European Institute, LSE.
  17. Metin M. CoÅŸgel & Thomas J. Miceli, 2009. "Tax Collection in History," Public Finance Review, , vol. 37(4), pages 399-420, July.
  18. 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.
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  20. Noel D. Johnson & Mark Koyama, 2014. "Taxes, Lawyers, and the Decline of Witch Trials in France," Journal of Law and Economics, University of Chicago Press, vol. 57(1), pages 77 - 112.
  21. Balla, Eliana & Johnson, Noel D., 2009. "Fiscal Crisis and Institutional Change in the Ottoman Empire and France," The Journal of Economic History, Cambridge University Press, vol. 69(03), pages 809-845, September.
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