Economics at your fingertips  

Efficient mercantilism? Revenue-maximizing monopoly policies as Ramsey taxation

Roger Congleton () and Sanghack Lee

European Journal of Political Economy, 2009, vol. 25, issue 1, 102-114

Abstract: The economics literature on mercantilism tends to emphasize gold hoarding and external barriers to trade as defining characteristics. Medieval institutions, however, included a host of internal barriers to trade as well as external ones, and monopoly privileges and high offices were often for sale. In this paper, we analyze how a stable unitary government's regulatory policies may be affected by revenues and other services generated by the efforts of rent seekers. Competition for monopoly privilege can be a significant source of government revenue that augments tax revenues, especially in settings in which collecting ordinary tax revenues is problematic. A revenue-maximizing government encourages greater monopolization than is compatible with economic efficiency, but sells monopoly privileges in a manner that promotes innovation and partially accounts for the deadweight losses associated with monopolized markets. Our analysis provides a possible public finance explanation for relatively successful authoritarian states that have relatively little corruption, but many internal and external barriers to trade.

Keywords: Mercantilism; Rent; seeking; Endogenous; rent; seeking; Rent; extraction; Leviathan; Corruption; Anti-trust; Dictatorship; Regulation; Public; choice; Innovation; Patents; Interest; groups; Encompassing; interest; Monopoly; Public; finance (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung

More articles in European Journal of Political Economy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-04-06
Handle: RePEc:eee:poleco:v:25:y:2009:i:1:p:102-114