Factor Price Manipulation, Bureaucratic Corruption, and State Capacity
Tay-Cheng Ma

This article uses ancient Chinese autocracy as a case to investigate the relation between politics and taxation. The result shows that, throughout Chinese history, most of the agricultural surplus of the people has been extracted by political elites through the channels of factor price manipulation and bureaucratic corruption.The key issue is not whether a high tax rate can promote growth, but rather whether the political regime is extractive or not. This provides a solid framework to explain why most developed countries impose significant tax burdens, as they function better than the weaker states in less developed countries.

Full Text: PDF     DOI: 10.15640/jeds.v9n3a1