Economics Seminar（2018-09）

Topic: Lower tax rate, greater state capacity: a rationalizing tax reform and famine relief in 18th century China

Speaker: Hao Yu, Peking University

Time: Tuesday,April24, 13:30-15:00p.m

Place: Room217, Guanghua Building 2

Abstract:

A prominent theme that figures in the Great Divergence debate pertains to the sharp differences in fiscal capacity between Europe and China. Although formal taxes in China were low, informal surtaxes were high, and corruption was rampant. We exploit a nationwide tax reform in 18th century China to formalize informal county surtaxes into formal taxes submitted to the provinces. We find that the reform, with lower tax rate, strengthened state capacity to provide public goods in two ways. First, it raised silver reserve at provinces and hence raised the frequency of famine relief in years of disasters (by greater magnitude in prefectures with difficulty to collect tax). Second, it raised official grain storage which could be used to stabilized grain price, and therefore reduced the frequency of famine relief in years of normal weather. However, both effects disappeared as soon as the central government appropriated this income. The failure of this reform sheds light on how a commitment problem between central and local government leads to low fiscal capacity in pre-modern China.

Introduction:

Yu Hao (郝煜) is an associate professor at School of Economics, Peking University. He received his bachelor degree from Guanghua School of Management, Peking University, and his PhD in economics from the University of California, Davis. His research primarily focuses on the economic history and political economy of late Imperial China. His publications include articles in the Explorations in Economic History, Australian Economic History Review as well as other scholarly monographs. More information can be found on his website:

//econ.crzb69.com/teacher_more.php?cid=379&id=7

Your participation is warmly welcomed!