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War Finance and the Modern State

Alberto Vesperoni ()

No 6/2013, NEPS Working Papers from Network of European Peace Scientists

Abstract: The institutional setting of the modern state is characterized by tax- ation, parliament, central banking and public debt. This work models war as a contest, where expenditures are funded in the financial market, and explores the complementary effects of these four institutions. If there is free entry in the financial market, taxation makes victory more likely, while under forced loans it increases the chances of defeat. With free entry, parliament and central bank are individually ineffective while they are a perfect substitute for taxation when both are in place. If the financial market is monopolized, the investor lends to both sides of the conflict and may want the states to develop these institutions to increase its profits.

Keywords: War; Taxation; Parliament; Central banking; Public debt (search for similar items in EconPapers)
JEL-codes: C72 D44 D53 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2013-09-11
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