Emily Sellars: Fiscal Legibility and State Development: Evidence from Colonial Mexico (with Francisco Garfias, UCSD)
We examine how fiscal legibility, the ability of a central government to observe local economic conditions for the purposes of taxation, shapes political centralization. When a ruler is unable to observe economic conditions, it can be preferable to grant autonomy to local intermediaries in charge of tax collection to encourage better performance. As a ruler’s ability to observe local conditions improves, so does the ability to monitor and sanction underperforming intermediaries. This enables the ruler to tighten control over tax collection, retain more revenue, and establish a more direct state presence. This shift also encourages the ruler to invest in further enhancing fiscal legibility over the longer term. We present a dynamic principal-agent model to illustrate this argument and provide empirical support for the theory using subnational panel data on local political institutions in colonial Mexico. We focus on the effects of a technological innovation that drastically improved the Spanish Crown’s ability to observe local economic production: the introduction of the patio process to refine silver. We show that the transition to direct rule differentially increased in mining districts following this technological innovation and that these areas saw greater investments in improving state informational capacity over the long term.
Date: 16 November 2021, 17:00 (Tuesday, 6th week, Michaelmas 2021)
Venue: Join Zoom Meeting https://zoom.us/j/93089349963?pwd=c2pZQm8vTFkwL0VoVndmUmpSSVcvZz09
Speaker: Emily Sellars (Yale University)
Organising department: Department of Economics
Part of: Economic and Social History Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Emma Heritage