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Rock, scissors, paper: the problem of incentives and information in traditional Chinese state and the origin of Great Divergence

By Debin Ma

Abstract

This article posits that the political institution of imperial China – its unitary and centralized ruling structure – is an essential determinant to China‘s long-run economic trajectory and its early modern divergence from Western Europe. Drawing on institutional economics, I demonstrate that monopoly rule, a long time-horizon and the large size of the empire could give rise to a path of low-taxation and dynastic stability in imperial China. But fundamental incentive misalignment and information asymmetry problems within its centralized and hierarchical political structure also constrained the development the fiscal and financial capacity of the Chinese state. Based on a reconstruction of two millennia records of incidences of warfare, this paper develops a narrative to show that the establishment and consolidation towards a single unitary monopoly of political power was an endogenous historical process. Using data series on warfare and government revenue for 17-19th century, I illustrate the Qing imperial rule as an epitome of the traditional Chinese political economy

Topics: DS Asia, HC Economic History and Conditions
Publisher: London School of Economics
Year: 2011
OAI identifier: oai:eprints.lse.ac.uk:37569
Provided by: LSE Research Online

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