Oligarchy, democracy, inequality and growth

• Published in: Journal of development economics Vol. 62; no. 2; pp. 285 - 313
• Main Authors: Bourguignon, François, Verdier, Thierry
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01-08-2000; Elsevier; North-Holland Pub. Co; Elsevier Sequoia S.A
• Series: Journal of Development Economics
• Subjects: Democracy; Democratization; Development economics; Economic development; Economic growth; Economic models; Economic theory; Education; Income distribution; Income redistribution; Inequality; Oligarchy; Political behavior; Political economy; Political participation; Redistribution; Democratization; O15; Redistribution; Political economy; Economic development; O11; D72; Inequality
• ISSN: 0304-3878; 1872-6089
• DOI: 10.1016/S0304-3878(00)00086-9

This paper analyses 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.