The Political Elite, Self-Interest and Democratization: The case of the Netherlands, 1870-1920

This dissertation consists of various studies that investigate the influence of political elites' incentives on their decision-making. I investigate the relationship between politicians and the pursuit of self-interest by focusing on arguably the most obvious proxy for self-interest: politicians' personal wealth. In chapter 2, I introduce the setting for the remainder of the dissertation: the Dutch political elite in the late nineteenth and early twentieth century. This period saw a radical economic, but also political change. This period arguably represents the country's transition from 'extractive' to 'inclusive' institutions, featuring rapid economic growth, and democratizing institutions.This chapter introduces the data on the wealth of the Dutch political elite, coming from newly-collected archival data on probate inventories. I document a pattern of extremely high wealth among politicians, up until the 1890's, after which the political elite's wealth declines slowly over time. This change in politicians' personal wealth coincides with the acceptance of important fiscal reforms. Even after several decades, and several suffrage extensions, the political elite remains extremely wealthy in comparison to the general population. The next chapter investigates the influence of politicians' personal wealth on the tendency to vote in favor of various far-reaching reforms. In particular, I focus on fiscal reforms, and on suffrage extensions. I leverage the fact that the fiscal reforms were progressive, such that wealthier politicians' expected future tax burden was higher than that of less wealthy politicians. I hypothesize that wealthier politicians are less likely to accept these laws. In the case of suffrage extensions, I hypothesize there is no effect of personal wealth. To establish causality, I make use of variation in the expected inheritance among politicians, and use exogenous variation in politicians' fathers' profession. The analyses show that there is an influence of personal wealth on the tendency to vote in favor of fiscal legislation, but there is no effect for suffrage extensions. The magnitude of the results is such that, had politicians collectively been wealthier by a factor of approx. 5 at the time of voting, many of the currently accepted laws would have been rejected. The counterfactuals imply that some rejected laws would have been accepted if parliament had been poorer at the time. Chapter 4 exploits a setting to look at the influence of a political career on politicians' personal wealth. By using data on candidates over a period of around 70 years, I investigate the influence of being elected an additional time on personal wealth, and I use a method to decompose these effects into ceteris paribus effects of the additional term in political office, and averages of future incumbency advantages and ceteris paribus effects. My results show that politicians are only able to accrue returns in the first period. In subsequent periods, there is no additional financial benefit to a political career. I dispell various alternative explanations, such as the selection of fair politicians, changes in consumption patterns, or career paths into lucrative functions post-political career. I provide evidence that the establishment of political parties has disciplined politicians.