Economic Interests and the Origins of Electoral Institutions

A recent wave of studies explores the effects of electoral institutions on economic interests. This paper instead examines the effects of economic interests on electoral institutions. We argue that electoral rules are a function of the nature and geographical dispersion of economic interests. Where class is the only economic division, the right always prefers majoritarian institutions (consistent with the distributive effects these institutions are known to have). Where interests are defined by investments in co-specific assets, and where these investments are geographically dispersed, (at least some) right parties will ally with the left to produce proportional representation (PR). They do so to protect their co-specific investments because PR is a representative system that permits opposition influence over regulatory policies. We explore the argument with historical data on economic structure and electoral systems. In recent years a wave of studies has shown the critical role of political institutions – in particular electoral institutions – in explaining economic policies and outcomes. Proportional representation (PR) has been linked to more government spending (Persson and Tabellini 2004,; Bawn and Rosenbluth 2006), greater equality (Crepaz 1998), more redistribution (Austen-Smit