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The Laspeyres-Paradox: tax overshifting in nineteenth century Prussia

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  • Mark Spoerer

    ()
    (School of Business and Economics, Humboldt University, Spandauer Str. 1, 10178 Berlin, Germany)

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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Bibliographic Info

Article provided by Association Française de Cliométrie (AFC) in its journal Cliometrica, Journal of Historical Economics and Econometric History.

Volume (Year): 2 (2008)
Issue (Month): 3 (October)
Pages: 143-171

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Handle: RePEc:afc:cliome:v:2:y:2008:i:3:p:173-193

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Keywords: Laspeyres' paradox; Milling and slaughter tax; Overshifting; Prussia; Rent-seeking behaviour;

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