Inequality in Landownership, Democracy, and Progressive Taxation: Evidence from Historical Data

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This chapter mainly investigates the relationship between inequality in landownership and progressive taxation and, moreover, examines whether this relationship is affected by the political institutions within a country. Building on a dataset of 20 countries, located principally in North America and Western Europe, over a period of two centuries, our analysis suggests that preindustrial inequality in the distribution of landownership exerted a negative and statistically significant impact on progressive taxation. In particular, countries which are characterized by larger concentration of land—and, consequently, powerful landed elites—did not implement redistributive tax. This relationship remains robust across a number of alternative specifications and, most importantly, alternative political regimes. In other words, our empirical findings suggest that it is the de facto power of agents (that comes from the distribution of the economic resources) and not the de jure power (which is mainly driven by the political institutions) that determines the implementation of a redistributive tax policy.