The Paradox of Power: Principal-agent problems and administrative capacity in Imperial China (and other absolutist regimes)

Debin Ma and Jared Rubin

Journal of Comparative Economics, 2019, vol. 47, issue 2, 277-294

Abstract: Tax extraction is often low in absolutist regimes. Why are absolutists unable to convert power into revenue? Supported by evidence from Imperial China, we explain this puzzle with a principal-agent model which reveals that absolutists, unconstrained by rule of law and unable to commit to not predating on their tax-collecting agents (and the masses), may find it optimal to settle for a low wage-low tax equilibrium, while permitting agents to keep extra, unmonitored taxes. Our analysis suggests that low investment in administrative capacity is a conscious choice for an absolutist since it substitutes for credible commitment to refrain from confiscation from its agents.

Keywords: Administrative capacity; Fiscal capacity; State capacity; Principal-agent problem; Monitoring; Credible commitment; Absolutism; Limited government; Taxation; China; Europe; Qing Empire (search for similar items in EconPapers)
JEL-codes: H20 N43 N45 P48 P51 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S014759671830194X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The paradox of power: principal-agent problems and administrative capacity in Imperial China (and other absolutist regimes) (2019)
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:eee:jcecon:v:47:y:2019:i:2:p:277-294

DOI: 10.1016/j.jce.2019.03.002

Access Statistics for this article

Journal of Comparative Economics is currently edited by D. Berkowitz and G. Roland

More articles in Journal of Comparative Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().