Xian Jiang from the University of California, Davis will present "State Simplification and Market Distortion: Evidence from China’s Millennia-Long Salt Administration"

Abstract: In historical settings and many developing economies today, states often adopt simplified administrative rules—what Scott (1998) terms “state simplification”—to make taxation and control tractable, at the cost of market distortion. We study this trade-off through China’s salt administration, a state-enforced monopoly that lasted for over a millennium. To facilitate tax collection, the state partitioned the empire into rigid production and distribution districts and prohibited cross-district trade. Combining new county-level data on salt production from 960 to 1920 with boundary changes across five regimes, we show that shifts in administrative market access systematically shaped where salt was produced. To quantify welfare consequences, we estimate a spatial model in which a monopolist state chooses production sites subject to administrative trade barriers. Counterfactuals show that state simplification generated substantial efficiency losses, but also help explain the persistence of the system: by simplifying monitoring and revenue collection, districting could remain fiscally attractive despite its allocative costs.