Late modern empires managed multiple priorities for security and development that placed constraints on scarce financial resources. How did these regimes determine the allocation of their budgets given these competing priorities? This paper presents a game theory for imperial budget allocations and opposition rebellion. The main implication of the model is that a regime builds the state's repressive capacity before substantially funding public spending. Each policy improves the regime's security against opposition rebellion, but the regime prioritizes public spending over repression spending as the budget grows. The paper tests this main implication by first-difference models within eight individual regimes across the empires of Japan, Germany, the Ottoman State, and Brazil during the late nineteenth and early twentieth centuries. The results of the quantitative analysis are consistent with the hypothesis for most regimes. Regimes in which patterns of spending do not conform with theoretical expectations appear to have fewer political institutions and shorter institutional histories. The model should generalize to other empires of the time period, but may also apply to contemporary authoritarian regimes and potentially democracies as well.
Journal of Historical Political Economy, Volume 2, Issue 2 Special Issue - The Political Economy of Empire: Articles Overview
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