The Coevolution of Economic and Political Development

Author: 
Fali Huang
Description: 
Paper No. 22-2006
JEL codes: 
Organisation: 
Abstract: 
This paper establishes a simple model of long run economic and political development, which is driven by the inherent technical features of dierent production factors, and political conicts among factor owners on how to divide the outputs. The main capital form in economy evolves from land to physical capital and then to human capital, which enables their respective owners (landlords, capitalists, and workers) to gain political powers in the same sequence, shaping the political development path from monarchy to elite ruling and finally to full suffrage. When it is too costly for any group of factor owners to repress others, political compromise is reached and economic progress is not blocked; otherwise, the political conicts may lead to economic stagnation.