From Internal Taxes to National Regulation: Evidence from a French Wine Tax Reform at the turn of the Twentieth Century
Bar Ilan University - Department of Economics
Noel D. Johnson
George Mason University - Department of Economics; George Mason University - Mercatus Center
John V. Nye
George Mason University - Department of Economics; National Research University Higher School of Economics
June 13, 2012
GMU Working Paper in Economics No. 10-21
The growth of the modern regulatory state is often explained in terms of an unambiguous increase in regulation driven by the actions of central governments. Contrary to this traditional narrative, we argue that governments often strove to weaken the autarkic tendencies of regional laws, thereby promoting greater trade and a more integrated market. For this purpose, we focus on the wine industry in France at the turn of the twentieth century and take advantage of a quasi-natural experiment generated by a law implemented on 1 January 1901 which lowered and harmonized various local tax rates. We show that high internal taxes on wine, set by regional governments, discouraged trade and protected small producers. We then trace how the political response to this tax decrease led to increases in wine regulation.
Number of Pages in PDF File: 37
Keywords: Regulation, State and Local Taxation, Markets
JEL Classification: H71, L51, K23, N43, R12working papers series
Date posted: August 21, 2010 ; Last revised: June 14, 2012
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