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Political Economy, Firm Survival and Entrepreneurship in Turkey: The Case of the Wealth Tax (1942)

Author

Listed:
  • Seven Ağır

    (Department of Economics, Middle East Technical University, Ankara, Turkey)

  • Cihan Artunç

    (Department of Economics, University of Arizona, Tucson, Arizona, USA)

Abstract

In 1942, the Republic of Turkey promulgated a controversial tax on personal wealth to finance mobilization of the army and curb inflation. The extraordinary tax was arbitrarily assessed and the burden fell disproportionately on non-Muslim minorities. The precise transformative effect of the tax on Turkey’s commercial life is not well understood. This article assembles a new dataset of firms operating in Istanbul to show the tax led to a dramatic rise on the liquidation of enterprises with non-Muslim ownership but no effect on Muslims. At the same time, the tax caused a sharp decline in the formation of new non-Muslim firms and a commensurate increase in the number of Muslim firms. The results show that the Wealth Tax forced the dissolution of otherwise productive, older firms and contributed to the further nationalization of the economy.

Suggested Citation

  • Seven Ağır & Cihan Artunç, 2017. "Political Economy, Firm Survival and Entrepreneurship in Turkey: The Case of the Wealth Tax (1942)," ERC Working Papers 1707, ERC - Economic Research Center, Middle East Technical University, revised Jun 2017.
    • Handle: RePEc:met:wpaper:1707
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • N84 - Economic History - - Micro-Business History - - - Europe: 1913-
    • N85 - Economic History - - Micro-Business History - - - Asia including Middle East
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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