The Customs – Continuity, Change and Impact on Bulgarian Economic Development (1878 – 1912)

The establishment of the Principality of Bulgaria in 1878 presents an opportunity for studying institutional change and continuity and the consequences of public choices on economic development. The paper focuses on tariff policy and organisation of customs during three decades until 1912. Initially, Bulgaria adopts the principles of the existing tax system of the Ottoman Empire and follows the trade agreements signed by the Empire with its European partners until the 1890s. Afterwards it concludes independently several rounds of agreements with all major counterparts based on ad valorem tariffs, increasing the rates over time. Bulgarian economic policies shift towards protectionism and support of infant industries around the turn of the century, leading to adoption of specific tariffs in 1906. This development fails to produce competitive industries but ensures higher budget revenues with a growing share of indirect taxes. The drawn-out policy change is accompanied by unceasing reforms of the customs at organisational level with a lot of energy spent on administrative details. The strategic economic choices made at the beginning of the 20th century reverberate through the development path of Bulgaria for the next several decades.