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War Finance and the Modern State

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Listed author(s):
  • Vesperoni , Alberto

    ()

    (Stockholm School of Economics)

Abstract

The institutional setting of the modern state is characterized by tax- ation, parliament, central banking and public debt. This work models war as a contest, where expenditures are funded in the financial market, and explores the complementary effects of these four institutions. If there is free entry in the financial market, taxation makes victory more likely, while under forced loans it increases the chances of defeat. With free entry, parliament and central bank are individually ineffective while they are a perfect substitute for taxation when both are in place. If the financial market is monopolized, the investor lends to both sides of the conflict and may want the states to develop these institutions to increase its profits.

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Paper provided by Network of European Peace Scientists in its series NEPS Working Papers with number 6/2013.

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Length: 36 pages
Date of creation: 11 Sep 2013
Handle: RePEc:ris:nepswp:2013_006
Contact details of provider: Web page: http://www.europeanpeacescientists.org/

More information through EDIRC

Keywords: War; Taxation; Parliament; Central banking; Public debt;

Find related papers by JEL classification:

  • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
  • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
  • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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