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Political Economy, Firm Survival and Entrepreneurship in Turkey: The Case of the Wealth Tax (1942)

Seven Ağır () and Cihan Artunç ()
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Seven Ağır: Department of Economics, Middle East Technical University, Ankara, Turkey

No 1707, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: In 1942, the Republic of Turkey promulgated a controversial tax on personal wealth to finance mobilization of the army and curb inflation. The extraordinary tax was arbitrarily assessed and the burden fell disproportionately on non-Muslim minorities. The precise transformative effect of the tax on Turkey’s commercial life is not well understood. This article assembles a new dataset of firms operating in Istanbul to show the tax led to a dramatic rise on the liquidation of enterprises with non-Muslim ownership but no effect on Muslims. At the same time, the tax caused a sharp decline in the formation of new non-Muslim firms and a commensurate increase in the number of Muslim firms. The results show that the Wealth Tax forced the dissolution of otherwise productive, older firms and contributed to the further nationalization of the economy.

Keywords: Turkish economic history; wealth tax; firm survival (search for similar items in EconPapers)
JEL-codes: N84 N85 O1 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2017-06, Revised 2017-06
New Economics Papers: this item is included in nep-ara, nep-bec, nep-cwa, nep-ent and nep-sbm
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