Abstract
AbstractThis paper examines the relationship between political equality and quality of government. Our hypothesis is that political equality fosters access to inclusive education and ultimately promotes good governance. We empirically test this hypothesis using data for 145 countries with different levels of economic development. In order to overcome potential endogeneity problems, our identification strategy exploits the variation in political equality in geographically neighbouring countries by means of spatial econometric techniques. The results reveal a positive and statistically significant effect of political equality on the quality of government. This implies that countries where political power is more evenly distributed tend on average to have higher levels of institutional quality. In fact, this result is not affected by the inclusion in the analysis of a substantial number of controls that may be correlated with both political equality and quality of government, including the extent of democracy and the degree of economic inequality. In fact, the observed link between political equality and governance remains robust to alternative measures of quality of government, estimation techniques, and other sensitivity checks. Our estimates also show that education acts as a transmission channel linking political equality and quality of government.
Highlights
Over the last decades a vast literature has shown the relevance of the quality of government for economic growth and long-run development (e.g. North, 1981; Knack and Keefer, 1995; Hall and Jones, 1999; Acemoglu et al, 2001, 2002; Rodrik et al, 2004)
To shed light on the causal effect of political equality on governance, our identification strategy exploits the variation in political equality in geographically neighbouring countries by means of spatial econometric techniques (Seldadyo et al, 2010; Kelejian et al, 2013)
Our estimates show that education acts as a transmission channel linking political equality and quality of government
Summary
Over the last decades a vast literature has shown the relevance of the quality of government for economic growth and long-run development (e.g. North, 1981; Knack and Keefer, 1995; Hall and Jones, 1999; Acemoglu et al, 2001, 2002; Rodrik et al, 2004). Engerman and Sokoloff (2000) point out that countries in Latin America and the Caribbean were historically characterized by high levels of economic inequality because of their geographical characteristics, which led to oligarchic politics and extractive institutions designed to maintain the political power of political elites and to preserve the existing inequality This gave rise to low levels of political equality and a restricted access to education for the general population (Galor et al, 2009).. The advances in the process of urbanization and the development of trade unions during the industrial revolution brought the emergence in different countries of Western Europe of politically powerful middle classes who favoured educational policies and reforms that promoted the education of the masses (Huber et al, 1993; Bourguignon and Verdier, 2000) Despite this historical evidence, to the best of our knowledge, none study has empirically examined the link between political equality and education. In the rest of the paper we aim to test empirically the validity of these hypotheses using data for a cross-section of countries with different levels of economic development
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