STONE CENTER ON SOCIO-ECONOMIC INEQUALITY WORKING PAPER SERIES No. 32 Testing Marx. Income Inequality, Concentration, and Socialism in Late 19th Century Germany Charlotte Bartels Felix Kersting Nikolaus Wolf March 2021 Testing Marx. Income Inequality, Concentration, and Socialism th in late 19 century Germany⇤ Charlotte Bartels Felix Kersting Nikolaus Wolf March 21, 2021 Abstract We study the dynamics of income inequality, capital concentration, and voting outcomes before 1914. Based on new panel data for Prussian counties and districts we re-evaluate the key economic debate between Marxists and their critics before 1914. We show that the increase in inequality was strongly correlated with a rising capital share, as predicted by Marxists at the time. In contrast, rising capital concentration was not associated with increasing income inequality. Relying on new sector county data, we show that increasing strike activity worked as an o↵setting factor. Similarly,⇥ the socialists did not directly benefit from rising inequality at the polls, but from the activity of trade unions. Overall, we find evidence for a rise in the bargaining power of workers, which limited the increase in inequality before 1914. JEL Classification: D31, D63, J31, N30 Keywords: Income Inequality, Concentration, Top Incomes, Capital Share, Germany ⇤Bartels: German Institute for Economic Research (DIW), IZA, and UCFS. Email:
[email protected]. Kersting: Humboldt-University Berlin. Email:
[email protected]. Wolf: Humboldt-University Berlin, CEPR, and CESifo. Email:
[email protected] Albers, Erik Bengtsson, Yonatan Berman, Giacomo Corneo, Branko Milanovic, Thomas Piketty, Emmanuel Saez, Daniel Waldenstr¨om, seminar participants at UC Berkeley, U Carlos III Madrid, Northwestern U, Paris School of Economics, U Nevada, U Warwick, DIW, as well as conference participants of WEHC 2018 Boston, LISER workshop “What drives inequality?” 2018, ECINEQ 2019 Paris, and EHES 2019 Paris for helpful comments.