Trade Politics Explain the Rise of Progressive Taxation Before WWI

This paper explores how trade politics influenced the emergence of progressive taxation in Europe before World War I. It argues that when labor interests aligned with elites through free trade coalitions, they secured compromise on redistributive policies.

The findings are particularly evident during periods of low inequality across ten European nations between 1870 and 1913. This "this means that" analysis reveals a clear causal relationship: increased trade interest proximity correlated strongly with more progressive tax systems.

Data & Methods:

• Time-series cross-sectional study analyzing political contexts in European countries (1870-1913)
• Examination of sub-national evidence from Britain focusing on constituency-level free trade interests and electoral alliances

Key Findings:

• Labor-elites coalitions over free trade were associated with greater tax progressivity elsewhere in Europe.
• This pattern was most pronounced during periods of low income inequality.
• Sub-national evidence confirms the mechanism through British Liberal–Labour MP alliances supporting progressive taxation (1906-1913).

Why It Matters: It demonstrates how economic policy debates, specifically trade politics, can significantly shape tax systems and social policies.