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Dummy Duration Severity
Density of Main Stations
Density of Employees
Density of Annual Revenue
1854 1855 1858 1861
0
3000
6000
9000
12000
15000
18000
21000
24000
SCENARIO SETTING: Political Disorder and Fiscal Capacity with Evidence from Late Imperial China
RESEARCH FOCUS: The Role of Taiping Rebellion in the Rise of the Indirect Taxation in Late Imperial China
EMPIRICAL EVIDENCE: Cross Sectional Data and OLS estimates for 266 prefectures in China
MECHANISMS AND IMPLICATIONS: More Identification Strategies and Discussions on Long-Term Economic Consequences
The Making of a Modern Fiscal State
Why the Chaotic 19th-Century China?
Taiping Rebellion (1851-1864)The largest internal war in Chinese history
provinces occupied years for suppression casualties12 14 70Msilver taels of military spending171M
Hypothesis: There is a positive link between military conflicts during the Taiping Rebellion and the rise of local indirect taxation (lijin) as an autonomousfiscal resource that persisted locally in a long run.
MechanismThe central government, given the scarce fiscal resource and theinability to suppress the rebels, had to delegate its power to localgovernments by encouraging their private militias.
To finance the militias, local governments started levying commercial tax (lijin) fromlocal trade; the lucrative taxation persisted even after the suppression of the Rebellionand made the local fiscal systems highly autonomous.
LijinTaxation i i i i
Taiping Warfare= β0 + β1 + β2 + εControls
Controlling other factors that affected lijin taxation: geographical /demographic condition, pre-1850 fiscal condition, post-1850 shocks, etc.
KeyReferences
1. Using Panel Data for a Dif-in-Dif Specification
2. Linking Indirect Taxation to Local
Industrialization with Taiping Warfare as
an IV
(1) Chen, F., 2015, 晚清财政说明书 (Compilation of Late Qing Financial Reports), Hubei People’s Press. (2) First Historical Archives of China (FHAC), 1996, 清政府镇压太平天国档案史料 (Archival Materials for the Suppression of the Taiping Rebellionby the Qing Government), Social Sciences Literature Press. (3) Guo, Y., 1989, 太平天国历史地图集 (The Atlas of the Taiping Rebellion), China Maps Press. (4) Liang, F., 1980, 中国历代户口、田地、田赋统计 (Statistics on Household, Land and LandTax for China’s Dynasties), Shanghai People’s Press. (5) Luo, Y., 1936 (2010), 中国厘金史 (The History of Lijin in China), Commercial Press.
Hanzhi DENG | [email protected] | Department of Economic History
THE MERIT OF MISFORTUNE: TAIPING REBELLION ANDTHE RISE OF INDIRECT TAXATION IN MODERN CHINA, 1850S-1900S
Radical Fiscal Transitions Reflected in Changing Government Revenue Structure
Question: Besides international wars, what was the role of the domestic chaos in the Late Qing fiscal transitions?
Taiping Warfare
LijinTaxation
• Public Financial History: Schumpeter (1954), Dickson (1967), Ormrodet al. (1999), Bonney (1999)
• New Institutionalist Economics: North and Weingast (1989), Fratianniand Spinelli (2006), Drelichman and Voth (2008), Dincecco (2009)
• Historical Sociology: Brewer (1988), Tilly (1992), Downing (1992)
05000
1000015000200002500030000350004000045000
1652 1685 1724 1725 1753 1766 1812 18410
100002000030000400005000060000700008000090000
100000
1885 1886 1887 1888 1889 1890 1891 1892 1893 1894
Why a Comparative Perspective?
• Constructive but Controversial Elements of a Fiscal State: powerconsolidation, bureaucracy, monetarized taxation, indirect taxation, credittools, etc. (Brewer, 1988; O’Brien and Hunt, 1999; Epstein, 2002)
• Non-European Evidence in Various Historical Contexts: Gardner(2012), He (2013), Frankema and Van Waijenburg (2014), Ko et al. (2018)
103 silver taels 103 silver taels
Land Tax
Salt Tax
Customs Tax
Miscellaneous Taxes
Land Tax
Salt Tax
Customs Tax
Miscellaneous Taxes
Commercial Tax (lijin)
Cross Sectional Data for 266 prefectures
Compiling information on Taiping battles and locating them to prefectures;evaluate the severity of the battles and give scores to them
Three MeasurementsDummyDurationSeverity
Compiling information about lijin stations, staffing and revenues fromprovincial financial reports of 1908 Fiscal Reorganization Campaign
Three MeasurementsMain lijin StationsLijin Employees
Estimated Annual lijin Revenue(all weighted by land size)
Empirical Strategy
Why cross-sectional data? 1. Persistence of lijin taxation from 1860sto 1900s; 2. High data quality only for the 1908 surveys
103 silver taels
Four Types of lijin taxes
• Relevance: strong correlation between theRebellion and the scale of the indirect taxation
• Exclusive Restrictions: exogeneity of theRebellion – no impact on local industrializationvia other channels
Density of Enterprises by 1910
-1.0 -0.5 0 0.5 1.0 1.5
-50 -25 0 25 50 75
-50 -25 0 25 50 75
Taiping SeverityCoast
Yangzi RiverLatitude
Land Tax p.c. 1820Domestic Custom
Treaty Port DurationNatural Disaster
Taiping SeverityCoast
Yangzi RiverLatitude
Land Tax p.c. 1820Domestic Custom
Treaty Port DurationNatural Disaster
Taiping SeverityCoast
Yangzi RiverLatitude
Land Tax p.c. 1820Domestic Custom
Treaty Port DurationNatural Disaster
Y = Density of Main Stations
Y = Density of Employees
Y = Density of Annual Revenue
Y = Density of Main Stations
X = Taiping Warfare Severity
Scatter Plotwithout Controls
Interpreting the Magnitude:Ceteris paribus extra 12-monthTaiping battles led to 1.57 newmain lijin stations, the effect ofwhich equals that of a treaty portrun for 24 years (given averageprefectural land size 16,332 km2).