A Model of a Predatory State

Boaz Moselle and Ben Polak ()
Additional contact information
Boaz Moselle: Northwestern University
Ben Polak: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/benjamin-polak

No 1158, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We provide a model of a primitive state whose rulers extort taxes for their own ends. This 'predatory' state can result in lower levels of both output and popular welfare than either organized banditry or anarchy. The predatory state may provide public goods, such as protection or irrigation, and hence may superficially resemble a contractual state. But, the ability to provide such goods can actually reduce popular welfare after allowing for tax changes. We compare the revenues raised by taxation with those from banditry to get an idea when primitive states are likely to emerge. We then consider interactions between bandits and the state. 'Corrupt' side-deals are bad for output and popular welfare, but good for revenue. Even in the absence of such collusion, the existence of a 'mafia' and of the state can be good for each other. Competition between organized crime and the state, however, typically reduces popular welfare and pushes the volume of banditry close to its anarchy level. Finally, we extend the basic model to allow the populace to form expectations of tax set by a long-lived king. Our relatively pessimistic conclusions about predatory states extend to this dynamic setting.

Pages: 45 pages
Date: 1997-08
Note: CFP 1019.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Journal of Law, Economics and Organization (2001), 17(1): 1-33

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