Oct 31, 2011

Democracy, GDP, and schooling

Abstract: Over the last two centuries, many countries experienced regime transitions toward democracy. We document this democratic transition over a long time horizon. We use historical time series of income, education and democracy levels from 1870 to 2000 to explore the economic factors associated with rising levels of democracy. We find that primary schooling, and to a weaker extent per capita income levels, are strong determinants of the quality of political institutions. We find little evidence of causality running the other way, from democracy to income or education.
They conclude:
Schumpeter (1942, chapter 22) argued that “modern democracy rose along with capitalism, and in causal connection with it (. . . ). Democracy in the sense of our theory of competitive leadership presided over the process of political and institutional change by which the bourgeoisie reshaped, and from its own point of view rationalized, the social and political structure that preceded its ascendancy (. . . ). Modern democracy is a product of the capitalist process”. This paper provides empirical support for this view. Using modern dynamic panel estimation methods and long run historical data going back to 1870, we documented an empirical link from the level of development, especially the level of primary schooling, to democracy. Investigating reverse causality from democracy to the educational attainment of young cohorts over the long run, we found little evidence of a positive and significant link. While democracies may not entail a larger quantity of schooling among young cohorts, they may be conducive to higher educational quality, for instance in the form of higher teacher-pupils ratio or higher expenditure per pupil at each stage of education. We leave this question open for future research.

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