The economic evolution of democracy

Using a variant of the Ramsey growth model, we explore the relationships between economic growth and the emergence of democracy. We argue that democracy acts as a commitment device to economic reforms favored by an elite under the threat of rebellion. Consistent with British economic history we model liberalizing reforms of the labor market as the mechanism by which the elite redistribute resources to the poor. We find that if democracy emerges it is preceded by a period of growth, however the emergence of democracy will only encourage further growth if the redistributions it entails do not significantly hamper capital accumulation.