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Taxation by auction: fund raising by 19th century Indian guilds


  • Sen, Arijit
  • Swamy, Anand V.


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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  • Sen, Arijit & Swamy, Anand V., 2004. "Taxation by auction: fund raising by 19th century Indian guilds," Journal of Development Economics, Elsevier, vol. 74(2), pages 411-428, August.
  • Handle: RePEc:eee:deveco:v:74:y:2004:i:2:p:411-428

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    References listed on IDEAS

    1. 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.
    2. Christopher Udry, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 495-526.
    3. 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 525-548, June.
    4. 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 147-174, October.
    5. P. J. Jones, 1965. "Economic Organization and Policies in the Middle Ages," Economic History Review, Economic History Society, vol. 17(3), pages 570-578, April.
    6. 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.
    7. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    8. 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 745-776, August.
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    More about this item

    JEL classification:

    • N85 - Economic History - - Micro-Business History - - - Asia including Middle East
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements


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