The Coevolution of Economic and Political Development from Monarchy to Democracy.Working Paper

This paper establishes a uni\u85ed political economy model to analyze the democratization process from monarchy to oligarchy and then to democracy with full su¤rage in the context of dynamic economic development. As the predominant source of wealth evolves from land to physical capital and \u85nally to human capital, the relative economic and hence coercive power of land owners, capitalists, and workers shifts accordingly, inducing the transition of the political system where political power is expanded from the owners of land to the owners of capital and then to the owners of labor. A smooth transition through political compromise facilitates e ¢ cient allocation of savings in physical capital followed by e ¢ cient investment in human capital. Failure to expand political power to support expanding investment would lead to the retarding of economic development. These results are broadly consistent with historical evidence in Western Europe