Trade and Taxation: Econometric Evidence from the Taxation of Merchant Ships at the Øresund in the 16th and 17th Centuries

Abstract

Tariffs may raise revenue today, but at what cost tomorrow? This thesis reveals how overtaxation of foreign trade can harm long-run tax revenues, using a case study with data from the 16th and 17th centuries that is highly relevant today. Focusing on the main shipping route connecting the Baltic and North Seas, the Øresund Strait, the study constructs a reproducible, granular dataset of 7,399,697 standardized ship-level commodity and tax observations from 1497 to 1857. We are the first to present a detailed comparative analysis of the structure and level of taxation in the Øresund, which we use for testing the Laffer Curve in a historical context. By running OLS regressions, we show that overtaxation likely reduced long-run tax revenue, with varying behavioral responses across nations. This work provides a solid framework for future research on historical taxation and combines economic theory with long-run empirical data from a unique historical source.