This study analyzes how the state may establish or lose a monopoly over violence in the context of late modernizers, taking imperial China as a laboratory. We construct new micro-level data that span several hundred years. We show evidence that, traditionally, there was greater state development – at the expense of private security provision via the clan – in response to mass rebellion, because the cost of public security was relatively low. After 1850, however, there was a dramatic increase in this cost due to China’s military loss to the West. In turn, we find evidence for greater private security provision – now at the expense of public provision – in response to internal conflict. This change reduced the imperial state’s monopoly over violence and eventually promoted state failure. Our study provides a new perspective on the long-run political dynamics of the Great Divergence.
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