Taxation, Credit and Public Expenditure in Urban Germany, 1400-1800
How did urban revenues and expenditure evolve in pre-industrial Germany? Trends in public wealth are crucial to understanding economic growth, public goods provision and inequality. This paper presents first trends in urban revenues and expenditure from 1350 to 1800. It is based on a novel city-level dataset comprising 22 cities. City selection is shown to be representative of the urban Empire at large. The data reveal the following trends: German cities financed themselves mostly through taxation and to a lesser extent through credit. While income from wealth taxes declined until 1550, income from consumption taxes and credit made up the shortfall. Together, this likely led to an increase in inequality. From 1550, this trend reversed and wealth taxes provided for a large share of income during and after the Thirty Years’ War (1618-1648). Prior to the war, cities spent most of their revenues on construction and debt servicing. Construction was focused on administrative buildings. After the war, military expenses and debt servicing dominated city expenditure.
Keywords: public finance, taxation, credit, fiscal capacity, Germany, cities
JEL Classification: N33, N93, N23, H20, H40