War Financing and the Transition from Absolutism to Rule by Parliament
Francesco Giovannoni and
Leandro de Magalhaes ()
No 917, 2012 Meeting Papers from Society for Economic Dynamics
During a war, the Commercial Elites are able to withhold resources from the King. If a defensive war is lost the King is replace by an alternate. The threat of losing such a war may lead the King to hand over power to the Commercial Elites in exchange of financial support to defend the country. The King may be forced to do so because he can not commit to following the policies preferred by the Elite in the future. The threat of replacement is credible if either the alternate King is aligned with the Commercial Elite interests or if the alternate King is better at winning wars. We argue that the transition that occurred during the Glorious Revolution is consistent with our model. We also argue that our model helps to explain why transitions to rule by Parliament took place first in England and Holland and only later in France and Spain.
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