A ruler who does not identify with a social group, whether on religious, ethnic, cultural or socioeconomic grounds, is confronted with a trade-off between taking advantage of the out-group population’s eagerness to maintain its identity and inducing it to “comply” (conversion, quit, exodus or any other way of accommodating the ruler’s own identity). This paper first analyzes the ruler’s optimal mix of discriminatory and non-discriminatory taxation, both in a static and an evolving environment. The paper then uses novel data sources to test the theory in the context of Egypt’s conversion to Islam between 641 and 1200. The evidence is broadly consistent with the theoretical predictions.
- D82: Asymmetric and Private Information • Mechanism Design
- H2: Taxation, Subsidies, and Revenue
- N45: Asia including Middle East
- Z12: Religion