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Stunted firms: The long-term impacts of colonial taxation

Gabriel Natividad ()

Journal of Financial Economics, 2019, vol. 134, issue 3, 525-548

Abstract: I study how the colonial mita forced labor system (1573–1812) impacted Peruvian firms’ formalization, investment, and performance measured by the 2008 business census. Regression discontinuity models with granular geospatial controls reveal lower sales and fixed assets, less likely use of a commercial name, and less likely tax ID registration for firms within mita boundaries. Firms with banking relationships in mita regions struggle more financially. Evidence on centuries-long disadvantageous taxation in mita regions suggests a persistent channel of distrust. Individuals in mita regions surveyed today show lower levels of trust in the tax authority and more informality at their workplace.

Keywords: Firm investment; Institutions; Culture; Taxation (search for similar items in EconPapers)
JEL-codes: E26 H32 L11 N16 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jfineco.2019.05.003

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Handle: RePEc:eee:jfinec:v:134:y:2019:i:3:p:525-548