Erosion of state power, corruption control and fiscal capacity

Weijia Li, Gérard Roland, Yang Xie

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)


We model how corruption erodes state power, that is, the state's ability to keep its apparatus under control in crises. Under a general assumption about fat-tailed risk of crisis, we show that given strong fiscal capacity, the head of the state will control local corruption at such a level that its power is secured; given weaker capacity, the state will over-tolerate corruption to retain officials, risking control in crises; moreover, a state may be trapped with too weak fiscal capacity, rampant corruption, and the state losing control in any real crisis, while having little incentive to invest in fiscal capacity. By developing historical narratives, we show that these theoretical results are consistent with experience from the Roman Empire, New Kingdom of Egypt, Ming China and many other powerful states in history.

Original languageEnglish
Pages (from-to)1542-1565
Number of pages24
JournalThe Economic Journal
Issue number644
Publication statusPublished - May 2022

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