The Economic Benefits of Taxing Property: A 400-Year Natural Experiment from France

• In Event: Property Tax Policies and Alternatives

Abstract

This paper examines the central hypothesis of the physiocrat economic tradition that property-based tax system are better for regional economic development. Using newly constructed localized individual-level data on occupations and migration since 1600 covering more than 7 millions individuals, this paper exploits a quasi-natural policy experiment in France’s ancien régime, the Taille. We estimate the causal relative effect of a property-based versus an income-based tax system. We show that regions with a property-based tax system exhibit a higher share of manufacturing in employment (+25%), higher population density (+30%) and larger urban development (+90%). Despite the harmonization of tax systems by the French Revolution, the historical property-tax region has engaged sooner in the industrial revolution (+69% more factories per squared km in 1834), and maintained a higher median income and population density to this day

Author

• Marko Koethenbuerger, ETH Zurich (Swiss Federal Institute of Technology in Zurich)