The Electoral Origin of the Fiscal State

Thursday, July 9, 2015
S13 (13 rue de l'Université)
Pablo Beramendi , Duke University
Didac Queralt , Juan March Institute
We present an electoral argument to explain the origins of the fiscal state in Europe. The paper theorizes the rise of the modern fiscal state as a byproduct of time-inconsistent electoral calculations by incumbent elites with distinctive ideological constituencies. By focusing on the strategic interaction over time between electorally motivated political parties, the analysis links directly decisions to expand the franchise, decisions about spending and decisions about the level and composition of revenues in a process in which elites move to secure their political position miscalculating the long-term implications of their short-run strategic moves. The analysis generates novel predictions about the partisan determinants of both the extensions of franchise and the development of fiscal policy. To asses these predictions, we build a new dataset of parliamentary majority by party families in 10 European democracies between 1820 and 1975. Econometric analyses  including fixed time and unit effects, a lagged dependent variable, and a battery of controls motivated by potential alternative explanations lend robust  empirical support to our argument.