Oligarchy, Democracy, Inequality and Growth
Paris School of Economics
Paris School of Economics (PSE); Delta - Ecole Normale Superieure (ENS); Centre for Economic Policy Research (CEPR)
Journal of Development Economics, Vol. 62, No. 2
This paper analyzes the dynamics of inequality, democratization and economic development in a political economy model of growth where education is both the engine of growth and a determinant of political participation. In a context with imperfect capital markets, we investigate the incentives for an educated oligarchy to subsidize the poor's education and to initiate a democratic transition. We characterize the equilibrium patterns of political institutions, income distribution and growth as a function of the initial income and inequalities. In particular, we identify circumstances under which the Elite promotes the endogenous emergence of a middle class for purely political economy reasons. A simple linear infinite horizon framework is then presented. In this setting, we discuss the importance of historical dependence for long-run social stratification and redistribution.
Keywords: Inequality, Economic development, Political economy, Redistribution, Democratization
JEL Classification: O11, O15, D72Accepted Paper Series
Date posted: March 30, 2001
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