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The Laspeyres-Paradox: Tax Overshifting in Nineteenth Century Prussia


  • Spoerer, Mark


Following the seminal work of late nineteenth century economist Etienne Laspeyres we analyse the incidence of the Prussian milling and slaughter tax shortly before its repeal in 1875. A comparison of flour prices in cities which levied this tax with cities that did not reveals unusually strong tax overshifting. Modern theories explain overshifting of a specific tax with quality improvements or imperfect competition. In pursuing these ideas we find that it was rather large surplus costs induced by tax collection and monitoring that caused unusually large excess burdens. The reason why the tax remained nevertheless basically unchanged for more than half a century is that the urban bourgeoisie successfully prevented its repeal, as the alternative would have been the introduction of municipal direct taxes (rent-seeking behaviour).

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  • Spoerer, Mark, 2007. "The Laspeyres-Paradox: Tax Overshifting in Nineteenth Century Prussia," MPRA Paper 6058, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:6058

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    1. Ivan O. KITOV & Oleg I. KITOV & Svetlana A. DOLINSKAYA, 2009. "Modelling Real Gdp Per Capita In The Usa:Cointegration Tests," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(1(7)_ Spr).
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    Laspeyres tax incidence overshifting;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • B19 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Other
    • N43 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: Pre-1913

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