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Taxation by Auction: Fund-Raising by 19th Century Indian Guilds

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Author Info
Arijit Sen
Anand V. Swamy () (Williams College)
Abstract

We describe a unique institution used by 19th century Indian guilds to raise funds: The guild members agreed that on a particular day all but one of their shops would be shut. An auction would be held to determine which one shop would remain open, and the winning bid would go to the guild funds. We compare this "taxation by auction" mechanism with more conventional tax schemes and show that under certain conditions, not only will a majority of the guild members prefer to be taxed via an auction, but that this form of taxation will be more equitable than other forms.

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Paper provided by Department of Economics, Williams College in its series Center for Development Economics with number 159.

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Date of creation: Nov 2000
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Handle: RePEc:wil:wilcde:159

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Related research
Keywords: Auctions; Fund-Raising; Indian Guilds; Taxation;

Find related papers by JEL classification:
N85 - Economic History - - Micro-Business History - - - Asia including Middle East
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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  1. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June. [Downloadable!] (restricted)
  2. Greif, Avner & Milgrom, Paul & Weingast, Barry R, 1994. "Coordination, Commitment, and Enforcement: The Case of the Merchant Guild," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 745-76, August. [Downloadable!] (restricted)
  3. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 495-526, July. [Downloadable!] (restricted)
  4. Besley, Timothy & Coate, Stephen & Loury, Glenn, 1993. "The Economics of Rotating Savings and Credit Associations," American Economic Review, American Economic Association, vol. 83(4), pages 792-810, September. [Downloadable!] (restricted)
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  5. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June. [Downloadable!] (restricted)
  6. Fafchamps, Marcel, 1992. "Solidarity Networks in Preindustrial Societies: Rational Peasants with a Moral Economy," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 147-74, October.
  7. R. Preston McAfee & Wendy Takacs & Daniel R. Vincent, 1999. "Tariffying Auctions," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 158-179, Spring. [Downloadable!] (restricted)
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