Democracy, Wages and Inequality : Political Voice and Public Finance Redistribution

Greater democracy increases the voice of the people, creating political contestation and participation, and leading to pro-labor institutional changes, higher wages and lower inequality. Political voice may therefore have a redistributive effect that is independent of redistribution through public finances. Using data from Britain and Ireland during a time when voting rights were extended gradually, we find that the larger the franchise, the higher the government expenditure on education and public amenities. However, greater state spending had relatively small effects on wages and inequality. Of greater significance were institutional changes stemming from political voice, and increases in labor productivity