Risk and transaction costs often provide competing explanations of institutional outcomes. In this paper we argue that they offer opposing predictions regarding the assignment of fixed and variable taxes in a multi-tiered governmental structure. While the central government can pool regional risks from variable taxes, local governments can measure variable tax bases more accurately. Evidence on tax assignment from the mid-sixteenth century Ottoman Empire supports the transaction cost explanation, suggesting that risk matters less because insurance can be obtained in a variety of ways.
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number
2003-04.
Length: 26 pages Date of creation: Jan 2003 Date of revision:
Sep 2004 Publication status: Published in Journal of Economic History, 2005, 65(3): 806-21. Handle: RePEc:uct:uconnp:2003-04
Note: We wish to thank the editor of the JOURNAL and two anonymous referees, the participants and discussants at the 2002 Annual Cliometrics Conference in La Crosse, WI; the 2003 Alumni Workshop in Iowa City, IA; and the 2003 Social Science History Association meetings in Baltimore, MD for helpful comments and suggestions. Ali Ozdemir, Sadik Yildirim, and Huseyin Yilmaz provided valuable research assistance. Contact details of provider: Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063 Phone: (860) 486-4889 Fax: (860) 486-4463 Web page: http://www.econ.uconn.edu/ More information through EDIRC
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Find related papers by JEL classification: H2 - Public Economics - - Taxation, Subsidies, and Revenue N1 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations N3 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
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