The Stability And Taxation Of The Government

The question discussed in this paper is the relation between stability and taxation of government. From an economically endogenous perspective and based on certain conditions, this paper explains the origin of government and builds a model of the relation between stability and taxation of government.Governments originated from comparative advantage. The power group and the producing group have different comparative advantages. Power groups finally unite as one and become a government. Wealth transferred between two groups become tax.Based on this, this paper discusses external stability and internal stability of a government. External stability of a government lies on the relation between government and producing group. A model is built to demonstrate the relation between stability of government and tax under certain sizes and strengths of both groups. When tax is too heavy, which causes large income gaps between two groups, producing group will start s revolution. Comparative static analyses based on the model show the influence of increasing population, developing production capability and foreign factors. Methods for a government to keep stability of are drawn from the model, including absorbing members of producing group, giving people more interest while developing production capability and strengthening itself.Internal stability lies on the relation between superior government and inferior governments. The model shows if income gap between superior and inferior is too large, a government will be internal instable. Analyses of French Revolution, English Bourgeois Revolution and Taiping Revolution demonstrate explanation strengths of the model.