THE COEVOLUTION OF ECONOMIC AND POLITICAL DEVELOPMENT FROM MONARCHY TO DEMOCRACY*

This article establishes a unified political economy model to analyze the democratization process from monarchy to oligarchy and to democracy in the context of dynamic economic development. As the predominant source of wealth evolves from land to physical capital and finally 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 landlords to capitalists and finally to workers. A smooth transition through political compromise facilitates efficient allocation of savings in physical capital followed by efficient investment in human capital.