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A DYNAMIC MODEL OF TAXATION, CORRUPTION, AND PUBLIC INVESTMENT IN THE DYNASTIC CYCLE: THE CASE OF IMPERIAL CHINA

Published online by Cambridge University Press:  17 March 2016

Kenneth S. Chan  and
Jean-Pierre Laffargue
Kenneth S. Chan
Affiliation:
McMaster University
Jean-Pierre Laffargue*
Affiliation:
University of Paris 1
*
Address correspondence to: Jean-Pierre Laffargue, Maison des sciences économiques, 106–112 boulevard de l'Hôpital, 75647 Paris Cedex 13, France; email: [email protected].
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Abstract

This paper develops a stochastic growth model that reproduces the main stylized facts of Imperial China's dynastic cycle—in particular, the time path of taxation, public spending, and corruption and their attendant impacts on production and income distribution. In this model, the emperor uses part of his tax income to finance the building of public capital and administrative institutions. This “institutional capital” enhances the productivity of the economy and limits extortion by the county magistrates. The dynastic cycle is driven by random shocks to the authority of the emperor and his central administration, which change the efficiency of institutional capital.

Keywords

Dynastic CycleInstitutional CapitalAppropriation FunctionCorruption
Type
Articles
Information
Macroeconomic Dynamics , Volume 20 , Special Issue 8: Technology Aspects in the Process of Development , December 2016 , pp. 2123 - 2147
Copyright
Copyright © Cambridge University Press 2016 

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