Assessing the City-State Advantage
Assessing the City-State Advantage
This chapter examines whether the difference in the activities of representative assemblies in city-states and territorial states had implications for the evolution of public credit. It first develops a basic game theoretic model that demonstrates how both political representation and public credit might emerge as an equilibrium outcome dependent on an underlying cost for representatives of monitoring public finances. It then uses the model to conduct empirical tests in order to identify what factors were correlated with the initial creation of a long-term public debt. Three hypotheses are tested: that access to credit depended on commercial and economic development; that access to credit depended on the presence of representative institutions; and that access to credit depended on the differing underlying conditions in city-states and territorial states. The results show that greater commercial and economic development favored access to public credit.
Keywords: representative assemblies, political representation, city-states, territorial states, public credit, public finance, public debt, economic development
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