Elite interests and public spending: Evidence from Prussian cities

  • Florian M. HollenbachEmail author


When do economic and political elites demand investment in public goods and services? The prevailing view is that non-democratic governments engage in low levels of government spending and taxation, because elites have interests in low taxation. Non-democracies exhibit significant variation in levels of government spending; the causes of these discrepancies have thus far not been thoroughly examined. I argue that where elites own capital that is conducive to government spending, regimes make higher investments. I test this argument using newly collected data on government spending as well as political and economic characteristics of 110 cities in 19th century Prussia. Using both standard regression models and instrumental variable analysis, I show that the economic needs of the local elites drove local government decisions on public spending.


Public spending Revenue Non-democracies Industrial demand Fiscal policy 

JEL Classification

H1 H41 H72 H75 I24 I25 I28 N13 O14 



I thank Joshua Alley for excellent research assistance. The paper has been presented at the Meeting of the European Political Science Association, Milan, Italy, June 2017. I thank Franziska Keller, the editor, three excellent reviewers, and participants at the Texas A&M Conference on Taxation, Revenue, and Fiscal Capacity for helpful comments on this project. All remaining errors are my own.

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Authors and Affiliations

  1. 1.Department of Political ScienceTexas A&M UniversityCollege StationUSA

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