The paradox of power: principal-agent problems and administrative capacity in Imperial China (and other absolutist regimes)

Debin Ma and Jared Rubin

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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: absolutism; administrative capacity; China; credible commitment; Europe; fiscal capacity; limited government; monitoring; principal-agent problem; Qing Empire; state capacity; taxation (search for similar items in EconPapers)
JEL-codes: H20 N43 N45 P48 P51 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2019-06-01
New Economics Papers: this item is included in nep-cna
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Citations: View citations in EconPapers (19)

Published in Journal of Comparative Economics, 1, June, 2019, 47(2), pp. 277-294. ISSN: 0147-5967

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Journal Article: The Paradox of Power: Principal-agent problems and administrative capacity in Imperial China (and other absolutist regimes) (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:100296

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