The Laspeyres-Paradox: tax overshifting in nineteenth century Prussia |
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Authors: | Mark Spoerer |
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Institution: | (1) School of Business and Economics, Humboldt University, Spandauer Str. 1, 10178 Berlin, Germany |
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Abstract: | Following the seminal work of the late nineteenth century economist Etienne Laspeyres I analyse the incidence of the Prussian
milling and slaughter tax shortly before its repeal in 1875. A comparison of flour prices in cities which levied this tax
with those that did not reveals unusually strong tax overshifting. Modern theories explain overshifting of a specific tax
with quality improvements or imperfect competition. In pursuing these ideas I find that it was rather large surplus costs
induced by tax collection and monitoring that caused unusually large excess burdens. The reason why the tax remained basically
unchanged for more than half a century is that the urban bourgeoisie successfully prevented its repeal, as the alternative
would have been the introduction of municipal direct taxes (rent-seeking behaviour).
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Keywords: | Laspeyres' paradox Milling and slaughter tax Overshifting Prussia Rent-seeking behaviour |
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