The Political Effects of Wealth Inequality: Evidence from a Danish Land Reform

Abstract

A prevalent viewpoint is that wealth inequality leads to political inequality and that economic elites are more powerful when they control a larger wealth share. However, as wealth inequality changes are often endogenous, studying the political consequences of wealth concentration is challenging. I study a 1919 Danish land reform that confiscated 20 to 25 percent of the value of entailed estates, which were old aristocratic land and capital holdings. Using difference-in-difference estimation, I assess the political effects of this shock to local wealth inequality. I find no effect of a wealth inequality decrease on pro-elite political outcomes. These results question the degree to which wealth inequality matters for political equality under widely held political rights and strong rule of law.