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

35 Pages Posted: 23 Jul 2020 Last revised: 16 Aug 2020

See all articles by Gema Lax-Martinez

Gema Lax-Martinez

University of Lausanne

Dominic Rohner

University of Lausanne

Alessandro Saia

University of Lausanne

Date Written: July 2020

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: conflict, Fiscal, growth, regression discontinuity design, state capacity, taxation, Unrest

JEL Classification: D74, H20, H26, J10, N43, O10

Suggested Citation

Lax-Martinez, Gema and Rohner, Dominic and Saia, Alessandro, Threat of Taxation, Stagnation and Social Unrest: Evidence from 19th Century Sicily (July 2020). CEPR Discussion Paper No. DP14981, Available at SSRN: https://ssrn.com/abstract=3650094

Gema Lax-Martinez (Contact Author)

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

Dominic Rohner

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

Alessandro Saia

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

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