¹ See James M. Buchanan, “Rent Seeking and Profit Seeking,” and Tullock, Gordon, ”Rent Seeking as a Negative Sum Game,” in Buchanan, James M., Tollison, Robert D. and Tullock, Gordon, eds., Toward a Theory of the Rent-Seeking Society (College Station, Texas: Texas A&M Press, 1980), 3–36.Google Scholar

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¹² Varying the weight of the two assets in the portfolio will produce an efficiency frontier of portfolios that will normally dominate either of the individual tax bases. The shape of this locus will depend upon the covariance in the returns from each tax base (p). The optimal portfolio in the locus will be some combination of the two taxes, depending upon the risk preference of the particular state. The optimal portfolio may also be determined with respect to an additional risk-free asset, leading to a set of portfolios along the “capital market line.” Such portfolios are either lending portfolios (containing some of the risk-free asset) or leveraged portfolios (the state borrows to invest in more of the selected tax portfolio on the efficiency locus). A point on the capital-market line is selected to reflect the state's risk preference. In either case, the state will have an incentive to diversify its tax portfolio. A simple introduction to the literature and principles of efficient portfolio diversification may be found in Francis, Jack C., Investments: Analysis and Management (New York: McGraw-Hill, 1972), 392–433.Google Scholar

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¹⁶ The 21 developed countries in the sample are: Australia, Austria, Belgium, Canada, Denmark, Federal Republic of Germany, Finland, France, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United Kingdom, United States. In 1977, all had per capita incomes in excess of U.S. $2,900, with a mean of U.S. $6,888.

The 79 developing countries are listed below by area:

South/Central America: Argentina, Barbados, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Equador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, Surinam, Uruguay.

Middle East: Cyprus, Egypt, Israel, Jordan, Syria, Yemen Arab Republic.

Asia/Pacific: Bangladesh, Burma, Fiji, India, Malaysia, Nepal, Papua-New Guinea, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand.

Africa: Benin, Botswana, Burundi, Cameroons, Chad, Congo, Ethiopia, Gambia, Ghana, Kenya, Lesotho, Liberia, Malagasy, Malawi, Mali, Mauritania, Mauritius, Morocco, Niger, Rwanda, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Tunisia, Upper Volta, Zaire, Zambia.

Europe: Greece, Malta, Portugal, Turkey, Yugoslavia.

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¹⁸ Sources for the local and central tax and revenue information for 1977 were International Monetary Fund, Government Finance Statistics Yearbook, III (Washington, D.C.: IMF, 1979)Google Scholar; United Nations, Statistical Yearbook (New York: U.N., 1978), 703–7Google Scholar (table 185), for GDP in local currencies.

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²³ Data for 1977 are from United Nations (fn. 18), 748–55 (table 192).

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²⁶ The data on socialist strength were derived from Banks, Arthur S., ed., Political Handbook of the World (New York: McGraw-Hill, 1978)Google Scholar, and defined as the proportion of seats in the lower legislature held by left-of-center political parties in 1975. In countries without working legislatures in 1975 (e.g., military governments), the SOC variable was coded as zero or unity, depending on Banks's description of government.

²⁷ See Cameron (fn.15), 1250–51, for a brief bibliographical survey of the literature that discusses “neomercantilist” reactions to interdependence.

²⁸ Cameron (fn. 15), 1251–53; Krasner (fn. 24), 135; Thorn (fn. 24), 46–47; Hinrichs (fn. 25). 551.

²⁹ See Dahl, Robert A., Modem Political Analysis (Englewood Cliffs, N.J.: Prentice-Hall, 1970), chaps. 5 and 6, esp. p. 51Google Scholar; Elkan, Walter, An Introduction to Development Economics (Harmondsworth, England: Penguin, 1973), chap. 1Google Scholar; Huntington, Samuel P., Political Order in Changing Societies (New Haven: Yale University Press, 1968), chap. 1Google Scholar; Apter, David E., The Politics of Modernization (Chicago: University of Chicago Press, 1965), chap. 7Google Scholar; Almond, Gabriel A. and Bingham Powell, G., Comparative Politics: A Developmental Approach (Boston: Little, Brown, 1966), chap. 7.Google Scholar

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³² ibid., 41.

³³ On risk aversion, institutional structures, and entrepreneurial activity, see Popkin, Samuel L., The Political Economy of Rural Society in Vietnam (Berkeley and Los Angeles: University of California Press, 1979).Google Scholar