Stunted firms: The long-term impacts of colonial taxation

I study how the colonial mita forced labor system (1573–1812) impacted Peruvian firms’ formalization, investment, and performance measured by the 2008 business census. Regression discontinuity models with granular geospatial controls reveal lower sales and fixed assets, less likely use of a commerci...

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Bibliographic Details
Published in:Journal of financial economics 2019-12, Vol.134 (3), p.525-548
Main Author: Natividad, Gabriel
Format: Article
Language:English
Subjects:
Censuses
Companies
Culture
Discontinuity
Effects
Firm investment
Forced labor
Institutions
Regression analysis
Sales
Taxation
Trade
Workplaces
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Summary:I study how the colonial mita forced labor system (1573–1812) impacted Peruvian firms’ formalization, investment, and performance measured by the 2008 business census. Regression discontinuity models with granular geospatial controls reveal lower sales and fixed assets, less likely use of a commercial name, and less likely tax ID registration for firms within mita boundaries. Firms with banking relationships in mita regions struggle more financially. Evidence on centuries-long disadvantageous taxation in mita regions suggests a persistent channel of distrust. Individuals in mita regions surveyed today show lower levels of trust in the tax authority and more informality at their workplace.
ISSN:0304-405X
1879-2774
DOI:10.1016/j.jfineco.2019.05.003