The Origins of Democracy: A Model with Application to Ancient Greece

Abstract

This paper seeks to provide an improved understanding of the origins of democracy. It begins by developing a theoretical model to demonstrate how exogenous economic conditions can influence both the incentives to establish democratic institutions and the likelihood that such institutions survive. The model predicts that democratic institutions will expand where they mitigate important time-inconsistency problems and, therefore, encourage investment. Exogenous conditions determine the magnitude of those time-inconsistency problems and, hence, the likelihood of democracy. A comparison of ancient Greek city-states suggests that the conditions under which democracy first emerged support the model. Other potential applications are discussed.

Keywords: Democracy, ancient Greece, time-inconsistency, property rights, institutions

JEL Classification: H1, D7, N4, D23