Threat of Taxation, Stagnation and Social Unrest: Evidence from 19th Century Sicily

Dominic Rohner, Gema Lax-Martinez and Alessandro Saia

No 14981, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Taxation may trigger social unrest, as highlighted by historical examples. At the same time, tax incomes could boost state capacity which may in turn foster political stability. Understanding better the a priori ambiguous taxation-turmoil nexus is particularly relevant for low-income countries today -- yet unfortunately any causal evidence on this has been very scarce. We exploit a unique policy experiment in 19th century Sicily to identify with the help of a regression discontinuity design (RDD) the effect of taxation on social unrest. It turns out that it is mostly the threat of taxation that may distort economic investment and ultimately result in higher levels of political turmoil.

Keywords: Taxation; Fiscal; Conflict; Unrest; Growth; Regression discontinuity design; State capacity (search for similar items in EconPapers)
JEL-codes: D74 H20 H26 J10 N43 O10 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-his
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Journal Article: Threat of taxation, stagnation and social unrest: Evidence from 19th century sicily (2022)
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