@techreport{Priks2005Optimal,
abstract = {Beginning in the mid-seventeenth century, England changed its system of raising revenues
from tax farming, combined with the granting of monopolies, to direct collection within the
government administration. Rents were then transferred from tax farmers and monopolists to
the central government such that English public finances improved dramatically compared to
both the old system and to its major competitor, France. We offer a theory explaining this
development. In our view, a cost of tax farming is the ex-ante inefficiency due to the auction
mechanism while a cost of direct collection is the ex-post monitoring cost the government
incurs to prevent theft. When the monitoring cost is high the government therefore allows tax
farmers to extract large rents to enhance their up-front payments. In addition, because
revenues materialize late under direct collection, and since the government faces limited
borrowing, a high default risk makes a system of up-front collection attractive. The results of
the model are consistent with historical facts from England and France.},
author = {Mikael Priks},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {H11; N43; 330; Direkte Steuer; Rententheorie; Steuer; Steuerfahndung; Kosten; Staatsbankrott; Agency Theory; Theorie; Grossbritannien; Frankreich},
language = {eng},
number = {1464},
title = {Optimal rent extraction in pre-industrial England and France : default risk and monitoring costs},
type = {CESifo working papers},
url = {http://hdl.handle.net/10419/18828},
year = {2005}
}
