A Model of Institutional Complementarities in Ancient China

In ancient China, the county system and feudalism were possible government organizational forms. Government officials might be selected through recommendations and examinations. The centralization of authority in the hands of emperors was achieved through a group of institutions such as the county system, the Imperial Examination System, and the division of authority among government officials. This paper provides a systematic interpretation of the interrelationship among this group of institutions and studies institutional complementarities in a model. It is shown that an increase in the degree of increasing returns in the military sector will increase the ruler’s incentive to adopt the county system. Institutional complementarities between the adoption of the Imperial Examination System and the division of authority among officials under the county system are established. A decrease in the level of coordination costs of elite increases the ruler’s incentive to choose a higher degree of the division of authority.