Essays in Economic History and Political Economy

Porcellacchia, Michael Franco

doi:https://doi.org/10.21985/n2-arks-2t21

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Essays in Economic History and Political Economy

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Chapter 1 proposes and tests a model where a country aligns with a foreign power to obtain its support and reduce its geopolitical risks, which also depend on the country's exposure to the other foreign powers. We show that the country's alignment with a given foreign power is increasing in the country's index of Indirect Exposure(IE-index) towards it -- the country's relative exposure to foreign powers it is less exposed to. Empirically, we compute every country's IE-index towards each foreign power using various measures of foreign exposure (including trade dependence) and establish its importance for economic, military, and diplomatic alignment. Additionally, we find that the theory can predict how the pattern of interstate alignment changed after the collapse of the Soviet Union and China's rise. Moving beyond alignment choices, we find that the IE-index is an important determinant of trade flows and foreign aid. Chapter 2 studies societies where a central authority can discriminate among different social groups and the tax extraction is only constrained by the groups' violence potential. We show that, in order to maximize tax extraction, the central authority will optimally adopt a divide-and-conquer strategy that we call political favoritism. In particular, we show that in equilibrium the central authority optimally creates a ranking among the subjects granting better taxation treatment to some groups at the expense of others even when groups are ex-ante homogeneous. Moreover, we show that when groups are heterogeneous, the central authority optimally favors wealthier groups. These observations suggest that central authorities have an active role in creating and exacerbating social stratification. Evidence from historical societies largely corroborates our prediction. Finally, Chapter 3 studies how internal conflicts are shaped by the political settings. Building on Chapter 2, we show that political favoritism creates competition over political rents, planting the seeds for a novel class of conflicts: status-related conflicts. Indeed, social groups have incentives to destroy/appropriate each other’s resources, asthey anticipate that the ruler optimally assigns a higher rank (thus a higher political rent) to wealthier social groups. Additionally, we show that not even the ruler is immune from the logic of violence that its own policy generates. Indeed, we show that the ruler’s adoption of political favoritism motivates social groups to support (or at least not to oppose) any claim that the wealthiest group in society might have on the rulership. This observation motivates another class of conflicts: whenever a social group is in a position to challenge the primacy of the ruling group, the two groups would start fighting over resources to come out on top of the other, thus obtaining or cementing the support to be the ruler. We support the theoretical analysis with a case study from Early Modern Europe and addressing the evidence on internal conflicts from both modern and historical settings.

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