Kenneth Scheve (Alesina Seminar)

Speaker & Title

Kenneth Scheve (Yale), "Market Power and Distorted Democracy in the Progressive Era"

Abstract

Does market power undermine democracy? This paper analyzes that question in the context of Progressive Era America. Using new furnace-level data, we construct county level measures of economic concentration in the steel industry from 1880 to 1916. Increases in steel industry market power led to lower voter turnout, increased support for socialist and progressive parties, and misalignment between voters and legislators on labor reforms and antitrust policy. We present a theoretical model in which firms and workers seek to influence policymaking to help interpret our empirical findings. Concentration increases equilibrium levels of worker repression and firm influence on policy through three channels. First, concentration creates rents which drive support for leftist policies, increasing firms’ willingness to repress. Second, increased rents from concentration fund repression. Third, concentration reduces free-riding because each firm internalizes a larger share of the benefit from preventing left policies. Market power can polarize politics and distort policy away from voters.

Co-sponsored by FAS and IQSS, the Alberto Alesina Seminar on Political Economy supports research-related activities that integrate the study of economics and politics, whether by studying economic behavior in the political process or political behavior in the marketplace. In general, positive political economy is concerned with showing how observed differences among institutions affect political and economic outcomes in various social, economic, and political systems and how the institutions themselves change and develop in response to individual and collective beliefs, preferences, and strategies.

All interested faculty and students are invited to attend.