The Political Economy of Financial Systems: Evidence from Suffrage Reforms in the Last Two Centuries. (28th July 2017)

• Record Type: Journal Article
• Authors: Degryse, Hans; Lambert, Thomas; Schwienbacher, Armin
• Is Part Of: Economic journal. Volume 128:Number 611(2018)
• Page Start: 1433
• Page End: 1475
• Publication Date: 2017-07-28
• Subjects: Economics -- Periodicals; Économie politique -- Périodiques; 330.05
• DOI: 10.1111/ecoj.12459
• Languages: English
• ISSNs: 0013-0133

Abstract

Abstract: Voting rights were initially limited to wealthy elites providing political support for stock markets. The franchise expansion induces the median voter to provide political support for banking development, as this new electorate has lower financial holdings and benefits less from the riskiness and financial returns from stock markets. Our panel data evidence covering the years 1830–1999 shows that tighter restrictions on the voting franchise induce greater stock market development, whereas a broader voting franchise is more conducive to the banking sector, consistent with Perotti and von Thadden (2006). The results are robust to controlling for other institutional arrangements and endogeneity.