The Laspeyres-Paradox: Tax Overshifting in Nineteenth Century Prussia

Mark Spoerer

MPRA Paper from University Library of Munich, Germany

Abstract: 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).

Keywords: Laspeyres; tax; incidence; overshifting (search for similar items in EconPapers)
JEL-codes: B19 H22 N43 (search for similar items in EconPapers)
Date: 2007-12-03
New Economics Papers: this item is included in nep-his and nep-pbe
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Journal Article: The Laspeyres-Paradox: tax overshifting in nineteenth century Prussia (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:6058

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