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Working Paper No. 1172

The Political Economics of Growth, Labor Control and Coercion: Evidence from a Suffrage Reform

Working Paper
Lindgren, Erik, Per Pettersson-Lidbom and Björn Tyrefors (2017). “The Political Economics of Growth, Labor Control and Coercion: Evidence from a Suffrage Reform”. IFN Working Paper No. 1172. Stockholm: Research Institute of Industrial Economics (IFN).

Erik Lindgren, Per Pettersson-Lidbom, Björn Tyrefors

In this paper, we analyze how a suffrage reform in 1862/63 that shifted the de jure distribution of political power from landowners to industrialists affected Sweden’s industrialization and economic and social development from the 1860s to the 1910s.

Using a newly constructed, comprehensive historical data set of the universe of approximately 2,400 Swedish local governments, we document that the change in suffrage affected a very large number of development and social outcomes at the local level, such as labor coercion, factor price manipulation in the form of entry barriers including investments in local public goods (i.e., schooling) and transportation (i.e., local railways), the real wage structure, technology adoption in both agriculture and industry, labor productivity in both agriculture and industry, changes in the composition of employment and the structure of production, demographic transition, organized labor, and persistence in dysfunctional local political institutions.

Our findings are consistent with the idea that political institutions are a key determinant of long-run development and growth. Specifically, our results suggest that politically powerful landowners can block economic development using labor coercion and factor price manipulation, i.e., using entry barriers and other distortionary policies.​