Working Paper: CEPR ID: DP8791
Authors: Debin Ma
Abstract: Based on a reconstruction of a weighted index of political unification and a time series of incidences of warfare for the past two millennia, this paper develops a narrative to show that the establishment and consolidation towards a single unitary monopoly of political power in China was an endogenous historical process. Drawing on new institutional economics, this article develops a historical narrative to 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 co-evolving with the growth of a private sector under China?s imperial system. But the fundamental problems of incentive misalignment and information asymmetry within its centralized and hierarchical political structure also placed limits to institutional change necessary for modern economic growth.
Keywords: incentive; information; political institution; unification; fragmentation; warfare
JEL Codes: H50; N4; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monopoly of political power (P26) | low taxation (H29) |
| monopoly of political power (P26) | dynastic stability (P16) |
| low taxation (H29) | growth of private sector (O17) |
| dynastic stability (P16) | growth of private sector (O17) |
| political unification (F55) | increased incidences of warfare (D74) |
| monopoly of political power (P26) | relatively free private economy (P19) |
| incentive misalignment and information asymmetry (D82) | limited institutional changes (P39) |