Democratic Reform and Opposition to Government Expenditure: Evidence from Nineteenth-Century Britai

Abstract

Several theories have argued that democratic reform will lead to higher government spending. However, these theories have generally focused on expenditure on redistribution rather than expenditure on public goods. This paper argues that poorer citizens may desire relatively low levels of public goods provision and so democratization may lead to lower government expenditure on items such as public infrastructure. This hypothesis is tested using a new panel dataset of town council infrastructure spending and revenue in nineteenth-century Britain. An 1894 national reform implementing a system of “one-household-one-vote” and the secret ballot is used as the treatment event in a difference-in-difference analysis. The results show that democratic reform slowed the growth of town council spending on public goods, including water supply and other public infrastructure. Further analysis suggests that government spending was highest when the balance of political power was held by the middle class, rather than the poor.