| This thesis uses principal-agent theory to make sense of China's reversal of fortune between the eighteenth and nineteenth centuries. My hypothesis emphasizes the role of size in shaping China's fiscal and organizational possibilities. I argue that the vast geographic size of the Chinese empire created immense difficulties for the imperial court to monitor state agents dispersed across the country. This in turn gave these agents strong incentives to extort from the taxpayers, especially the politically weak ones. Consequently, the imperial court had to keep taxes low and the bureaucracy small to prevent overexploitation that could foment rebellion.;The Qing state's fiscal weakness was initially masked by its huge tax base. However, between 1700 and 1850, China's population more than doubled. This aggravated the managerial diseconomies of scale embedded in its political institutions, intensified corruption, and put a further squeeze on state finances. The result was the paradox of a weakening state despite an expanding economy. The ensuing political instability eventually put a halt to sustained economic expansion.;The thesis is organized as follows. Chapter 1 sets up the research question. Using historical records, I reconstruct the Qing dynasty's tax revenues between 1650 and 1850. The results show that economic expansion did not benefit state coffers in the long run. The Qing state's fiscal capacity contracted steadily after the early eighteenth century, even as the economy continued to grow extensively. This development was accompanied by a gradual withdrawal of the state's involvement in public goods provision over time.;Chapter 2 presents an explanation of the historical patterns observed in Chapter 1. To establish the hypothesis formally, a model is set up and tested. In line with its predictions, I find that the Qing state taxed less and set up fewer counties in regions further away from the capital Beijing.;If distance matters, we should also observe a higher level of fiscal and administrative efficiency in a smaller but otherwise similar country. In Chapter 3, Chiaki Moriguchi and I analyze Tokugawa Japan from a comparative perspective. We find clear evidence in support of the hypothesis. |
