The Great Revenue Divergence

Alexander Lee and Jack Paine

International Organization, 2023, vol. 77, issue 2, 363-404

Abstract: This article describes and explains a previously overlooked empirical pattern in state revenue collection. As late as 1913, central governments in the West collected similar levels of per capita revenue as the rest of the world, despite ruling richer societies and experiencing a long history of fiscal innovation. Western revenue levels permanently diverged only in the following half-century. We identify the twentieth-century great revenue divergence by constructing a new panel data set of central government revenue with broad spatial and temporal coverage. To explain the pattern, we argue that sustainably high levels of revenue extraction require societal demand for an activist state, and a supply of effective bureaucratic institutions. Neither factor in isolation is sufficient. We formalize this insight in a game-theoretic model. The government can choose among low-effort, legibility-intensive, and crony-favoring strategies for raising revenues. Empirically, our theory accounts for low revenue intake in periods of low demand (the nineteenth-century West) or low bureaucratic capacity (twentieth-century former colonies), and for eventual revenue spikes in the West.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:intorg:v:77:y:2023:i:2:p:363-404_4

Access Statistics for this article

More articles in International Organization from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().