Income, Education and Democracy

This paper puts forth a unified theory of growth and polity in which economic development affects a country's polity and polity affects its development. Education crucially impacts both trajectories, first by moving resources out of the traditional sector and decreasing incomes of the landed class and second, by increasing the de facto power of the masses. An autocrat aligned with the landed class will try to retard education of its citizens but eventually will relinquish power when the transfers needed to prevent the masses from revolting become too large. At this point society democratizes and the economy's growth path is determined by the median voter. The model is calibrated to the economic and political histories of Britain from 1200-2000 and used to quantify the role of education, land inequality, constraints on the executive, and school curricula for the timing of modernization and democratization. The effects of these factors are found to be large, on the order of centuries. The paper also contributes to the empirical literature by showing that support for the modernization hypothesis based on System General Method of Moments estimation is more robust than previous research suggests and by showing that only primary education predicts democracy in this estimation method.