Rock, scissors: the problem of incentives and information in the traditional China state and the origin of the Great Divergence

Debin Ma ()
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Debin Ma: London School of Economics

No 11002, Working Papers from Economic History Society

Abstract: "Using a newly reconstructed data series of two and a half millennia on Chinese warfare and durations of political unification and fragmentation, this article provides a re-interpretation of the traditional Chinese political regime from the perspective of institutional economics. Structured within a principal-agent model with three major actors - the emperor, the bureaucracy and the people - the article demonstrates that monopoly rule, a long time-horizon and the large size of the empire could lead an absolutist regime like imperial China towards a path of low-taxation, dynastic stability and extensive growth. But fundamental incentive misalignment and information asymmetry problem embedded in its centralized and hierarchical political structure also significantly weakened the regime’ fiscal and financial capacity to support institutions and institutional change conducive to modern economic growth. Using comparable series of fiscal revenue, the paper makes some comparisons between Imperial Qing (1644-1911) and contemporaneous Western Europe."

JEL-codes: N00 (search for similar items in EconPapers)
Date: 2011-04
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Citations: View citations in EconPapers (5)

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