Size and dynastic decline: The principal-agent problem in late imperial China, 1700–1850
Tuan-Hwee Sng
Explorations in Economic History, 2014, vol. 54, issue C, 107-127
Abstract:
This paper argues that China's size was one reason behind its relative decline in the nineteenth century. A ruler governing a large country faces severe agency problems. Given his monitoring difficulties, his agents have strong incentives to extort the taxpayers. This forces him to keep taxes low to prevent revolts. Economic expansion could aggravate corruption and cause further fiscal weakening. To support the model's predictions, I show that the Chinese state taxed and administered sparingly, especially in regions far from Beijing. Furthermore, its fiscal capacity contracted steadily during the prosperous eighteenth century, sowing the seeds for the nineteenth-century crises.
Keywords: Economic history; Political economy; China; Taxation; Public goods; Institutions and growth (search for similar items in EconPapers)
JEL-codes: N15 N45 O43 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (39)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:exehis:v:54:y:2014:i:c:p:107-127
DOI: 10.1016/j.eeh.2014.05.002
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