Tax structure, size of government, and the extension of the voting franchise in Western Europe, 1860–1938 (original) (raw)
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2007
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The Quarterly Journal of Economics, 2000
During the nineteenth century, most Western societies extended voting rights, a decision that led to unprecedented redistributive programs. We argue that these political reforms can be viewed as strategic decisions by political elites to prevent widespread social unrest and revolution. Political transition, rather than redistribution under existing political institutions, occurs because current transfers do not ensure future transfers, while the extension of the franchise changes the future political equilibrium and acts as a commitment to redistribution. Our theory also offers a novel explanation for the Kuznets curve, whereby the fall in inequality follows redistribution due to democratization. We characterize the conditions under which an economy experiences the development path associated with the Kuznets curve, as opposed to two non-democratic paths: an "autocratic disaster", with high inequality and low output, and an "East Asian Miracle", with low inequality and high output.
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1 In addition to the challenge of explaining why contemporary tax structures vary across space and time, which is our concern in this paper, other major questions in the political economy of taxation include: (i) what determines the power to tax? (ii) how and why do observed tax structures differ from optimal tax systems? and (iii) how can we understand the process of tax reform? For recent contributions concerning (i), see Besley and Persson (2009) and North, Wallis and Weingast (2009). On (ii) see, for example, some of the background papers and comments for the Commission on Reforming the Tax System (the Mirrlees Review); On (iii) see, and Hettich and Winer (1999, chap. 6) and the references therein.
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