Fiscal Centralization, Limited Government, and Public Revenues in Europe, 1650-1913

Abstract

Old Regime polities typically suffered from fiscal fragmentation and absolutist rule. By the start of World War I, however, many such countries had centralized institutions and limited government. This paper uses a new panel or time-series cross-section (TSCS) data set to perform a two-part statistical analysis of political regimes and public revenues in Europe from 1650 to 1913. Panel regressions indicate that centralized and/or limited regimes were associated with significantly higher revenues than fragmented and absolutist ones. Structural break tests also suggest close relationships between major turning points in revenue series and political transformations.

JEL Classification: N23, P48, O16