Impact of Geography on Institutions in Agricultural and Nomadic Societies

ABSTRACT How geography affects the choice of institutions is studied in a theoretical model. In this model, nations are located around a circle. Rulers compete through choosing tax rates, the level of military spending, and the degree of formality of institutions. Geographic condition is captured by population density. It is shown that societies with higher population densities choose lower tax rates, establish more formal institutions, and give government officials lower levels of autonomies than those with lower population densities do. A higher level of external threats induces a ruler to choose a higher level of autonomy for officials. The model is illustrated by comparing institutions of agricultural and nomadic regimes in ancient China.