Oligarchy, democracy, inequality and growth

This paper analyses the dynamics of inequality, democratization and economi c development in a political economy model of growth where education is bot h the engine of growth and a determinant of political participation. In a c ontext with imperfect capital markets, we investigate the incentives for an educated oligarchy to subsidize the poor's education and to initiate a dem ocratic transition, We characterize the equilibrium patterns of political i nstitutions, income distribution and growth as a function of the initial in come and inequalities. In particular, we identify circumstances under which the Elite promotes the endogenous emergence of a middle class for purely p olitical economy reasons. A simple linear infinite horizon framework is the n presented, In this setting, we discuss the importance of historical depen dence for long-run social stratification and redistribution. (C) 2000 Elsev ier Science B,V. All rights reserved, JEL classification: O11; O15; D72.