IDEAS home Printed from https://ideas.repec.org/p/cam/camdae/0766.html
   My bibliography  Save this paper

The Taxman Tools Up: An Event History Study of the Introduction of the Personal Income Tax in Western Europe, 1815-1941

Author

Listed:
  • Aidt, T.
  • Jensen, P.S.

Abstract

The introduction of income taxation was a landmark in the development of the fiscal state in Western Europe and elsewhere. This paper presents an event history study of the adoption of the income tax in 11 Western European countries between 1815 and 1941. We find evidence that social learning, reductions in tax collection costs and to a lesser extend spending pressures played a significant role for the adoption decision. Surprisingly, we also .nd evidence that the extension of the franchise reduced the likelihood of adoption of the income tax.

Suggested Citation

  • Aidt, T. & Jensen, P.S., 2007. "The Taxman Tools Up: An Event History Study of the Introduction of the Personal Income Tax in Western Europe, 1815-1941," Cambridge Working Papers in Economics 0766, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:0766
    as

    Download full text from publisher

    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe0766.pdf
    File Function: Working Paper Version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 69-85, Fall.
    2. Winer, S.L. & Rutherford, T., 1991. "Coercive Redistribution and Franchise : A Preliminary Investigation Using Computable General Equilibrium Modelling," Papers 5, Carleton - School of Public Administration.
    3. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1167-1199.
    4. Becker, Gary S & Mulligan, Casey B, 2003. "Deadweight Costs and the Size of Government," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 293-340, October.
    5. Peltzman, Sam, 1980. "The Growth of Government," Journal of Law and Economics, University of Chicago Press, vol. 23(2), pages 209-287, October.
    6. Peter Lindert, 2004. "Social Spending and Economic Growth," Challenge, Taylor & Francis Journals, vol. 47(4), pages 6-16.
    7. Zorn, Christopher, 2005. "A Solution to Separation in Binary Response Models," Political Analysis, Cambridge University Press, vol. 13(2), pages 157-170, April.
    8. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December.
    9. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521662918.
    10. King, Gary & Zeng, Langche, 2001. "Logistic Regression in Rare Events Data," Political Analysis, Cambridge University Press, vol. 9(2), pages 137-163, January.
    11. Hettich, Walter & Winer, Stanley L, 1988. "Economic and Political Foundations of Tax Structure," American Economic Review, American Economic Association, vol. 78(4), pages 701-712, September.
    12. Lindert Peter H., 1994. "The Rise of Social Spending, 1880-1930," Explorations in Economic History, Elsevier, vol. 31(1), pages 1-37, January.
    13. Winer, Stanley L. & Hettich, Walter, 1991. "Debt and tariffs : An empirical investigation of the evolution of revenue systems," Journal of Public Economics, Elsevier, vol. 45(2), pages 215-242, July.
    14. Peltzman, Sam, 1980. "The Growth of Government," Working Papers 1, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    15. Breyer, Friedrich & Ursprung, Heinrich W, 1998. "Are the Rich Too Rich to be Expropriated?: Economic Power and the Feasibility of Constitutional Limits to Redistribution," Public Choice, Springer, vol. 94(1-2), pages 135-156, January.
    16. Albert Breton & Gianluigi Galeotti & Pierre Salmon & Ronald Wintrobe, 1993. "Preferences and Democracy," Post-Print hal-00445588, HAL.
    17. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    18. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    19. J. Ernesto Lopez-Cordova & Christopher M. Meissner, 2005. "The Globalization of Trade and Democracy, 1870-2000," NBER Working Papers 11117, National Bureau of Economic Research, Inc.
    20. Lawrence Kenny & Stanley Winer, 2006. "Tax Systems in the World: An Empirical Investigation into the Importance of Tax Bases, Administration Costs, Scale and Political Regime," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(2), pages 181-215, May.
    21. Berry, Frances Stokes & Berry, William D., 1990. "State Lottery Adoptions as Policy Innovations: An Event History Analysis," American Political Science Review, Cambridge University Press, vol. 84(2), pages 395-415, June.
    22. Meissner, Christopher M., 2005. "A new world order: explaining the international diffusion of the gold standard, 1870-1913," Journal of International Economics, Elsevier, vol. 66(2), pages 385-406, July.
    23. Hettich,Walter & Winer,Stanley L., 2005. "Democratic Choice and Taxation," Cambridge Books, Cambridge University Press, number 9780521021807.
    24. Roger Congleton, 2004. "Economic Development and Democracy. Does Industrialization Lead to Universal Suffrage?," Homo Oeconomicus, Institute of SocioEconomics, vol. 21, pages 283-314.
    25. Ashworth, John & Geys, Benny & Heyndels, Bruno, 2006. "Determinants of tax innovation: The case of environmental taxes in Flemish municipalities," European Journal of Political Economy, Elsevier, vol. 22(1), pages 223-247, March.
    26. Daunton,Martin, 2001. "Trusting Leviathan," Cambridge Books, Cambridge University Press, number 9780521803724.
    27. Toke Aidt & Peter Jensen, 2009. "Tax structure, size of government, and the extension of the voting franchise in Western Europe, 1860–1938," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(3), pages 362-394, June.
    28. Mueller,Dennis C. (ed.), 1997. "Perspectives on Public Choice," Cambridge Books, Cambridge University Press, number 9780521553773.
    29. Aidt, T.S. & Dutta, Jayasri & Loukoianova, Elena, 2006. "Democracy comes to Europe: Franchise extension and fiscal outcomes 1830-1938," European Economic Review, Elsevier, vol. 50(2), pages 249-283, February.
    30. Toke Aidt & Bianca Dallal, 2008. "Female voting power: the contribution of women’s suffrage to the growth of social spending in Western Europe (1869–1960)," Public Choice, Springer, vol. 134(3), pages 391-417, March.
    31. Husted, Thomas A & Kenny, Lawrence W, 1997. "The Effect of the Expansion of the Voting Franchise on the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 54-82, February.
    32. Tridimas, George & Winer, Stanley L., 2005. "The political economy of government size," European Journal of Political Economy, Elsevier, vol. 21(3), pages 643-666, September.
    33. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
    34. Christopher M. Meissner & Jose Ernesto Lopez Cordova, 2005. "Globalization and Democracy, 1870-2000," 2005 Meeting Papers 112, Society for Economic Dynamics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aidt, Toke S. & Jensen, Peter S., 2009. "The taxman tools up: An event history study of the introduction of the personal income tax," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 160-175, February.
    2. Toke Aidt & Peter Jensen, 2009. "Tax structure, size of government, and the extension of the voting franchise in Western Europe, 1860–1938," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(3), pages 362-394, June.
    3. Toke Aidt & Peter Jensen, 2013. "Democratization and the size of government: evidence from the long 19th century," Public Choice, Springer, vol. 157(3), pages 511-542, December.
    4. Aidt, Toke S. & Eterovic, Dalibor S., 2011. "Political competition, electoral participation and public finance in 20th century Latin America," European Journal of Political Economy, Elsevier, vol. 27(1), pages 181-200, March.
    5. Toke Aidt & Stanley L. Winer & Peng Zhang, 2020. "Franchise Extension and Fiscal Structure in the United Kingdom 1820-1913: A New Test of the Redistribution Hypothesis," CESifo Working Paper Series 8114, CESifo.
    6. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    7. Aidt, T.S. & Eterovic, D.S., 2007. "Give and Take: Political Competition, Participation and Public Finance in 20th Century Latin America," Cambridge Working Papers in Economics 0714, Faculty of Economics, University of Cambridge.
    8. Aidt, Toke S. & Jensen, Peter S., 2014. "Workers of the world, unite! Franchise extensions and the threat of revolution in Europe, 1820–1938," European Economic Review, Elsevier, vol. 72(C), pages 52-75.
    9. Profeta, Paola & Puglisi, Riccardo & Scabrosetti, Simona, 2013. "Does democracy affect taxation and government spending? Evidence from developing countries," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 684-718.
    10. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2016. "Why Can Modern Governments Tax So Much? An Agency Model of Firms as Fiscal Intermediaries," Economica, London School of Economics and Political Science, vol. 83(330), pages 219-246, April.
    11. Aidt, Toke S. & Mooney, Graham, 2014. "Voting suffrage and the political budget cycle: Evidence from the London Metropolitan Boroughs 1902–1937," Journal of Public Economics, Elsevier, vol. 112(C), pages 53-71.
    12. Dalibor Eterovic & Nicolas Eterovic, 2010. "Political Competition vs. PoliticalParticipation: Effects on Government's Size," Working Papers wp_006, Adolfo Ibáñez University, School of Government.
    13. Dongwon Lee & Dongil Kim & Thomas E. Borcherding, 2013. "Tax Structure and Government Spending: Does the Value-Added Tax Increase the Size of Government?," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(3), pages 541-570, September.
    14. Asatryan, Zareh & Baskaran, Thushyanthan & Heinemann, Friedrich, 2017. "The effect of direct democracy on the level and structure of local taxes," Regional Science and Urban Economics, Elsevier, vol. 65(C), pages 38-55.
    15. Stanley L. Winer, 2016. "The Political Economy of Taxation: Power, Structure, Redistribution," Carleton Economic Papers 16-15, Carleton University, Department of Economics.
    16. Tiago V. de V. Cavalcanti & Jose Tavares, 2003. "Women prefer larger governments: female labor supply and public spending," Nova SBE Working Paper Series wp433, Universidade Nova de Lisboa, Nova School of Business and Economics.
    17. Dalibor Eterovic & Nicolás Eterovic, 2012. "Political competition versus electoral participation: effects on government’s size," Economics of Governance, Springer, vol. 13(4), pages 333-363, December.
    18. Francois Facchini, 2018. "What Are the Determinants of Public Spending? An Overview of the Literature," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 46(4), pages 419-439, December.
    19. Kammas, Pantelis & Sarantides, Vassilis, 2020. "Democratisation and tax structure in the presence of home production: Evidence from the Kingdom of Greece," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 219-236.
    20. Toke S. Aidt & Stanley L. Winer & Peng Zhang, 2022. "Franchise extension and fiscal structure in the UK 1820–1913: a new test of the Redistribution Hypothesis," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 16(3), pages 547-574, September.

    More about this item

    Keywords

    Voting franchise; social learning; tax collection technology; public finance; income taxation.;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H1 - Public Economics - - Structure and Scope of Government

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cam:camdae:0766. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jake Dyer (email available below). General contact details of provider: https://www.econ.cam.ac.uk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.