The Laspeyres-Paradox: tax overshifting in nineteenth century Prussia

Mark Spoerer

Cliometrica, Journal of Historical Economics and Econometric History, 2008, vol. 2, issue 3, 143-171

Abstract: Following the seminal work of the late nineteenth century economist Etienne Laspeyres I 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 those 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 I 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 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' paradox; Milling and slaughter tax; Overshifting; Prussia; Rent-seeking behaviour (search for similar items in EconPapers)
JEL-codes: B19 H22 N43 (search for similar items in EconPapers)
Date: 2008
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Working Paper: The Laspeyres-Paradox: Tax Overshifting in Nineteenth Century Prussia (2007)
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