Structural Change and Democratization: Evidence from Rural Apartheid

Abstract

The relationship between economic development and democracy is key in political economy. Many commentators have suggested that economic growth increases support for democracy. One proposed mechanism is that modernization, by reducing the demand for low-skilled labor, increases the willingness of elites, particularly in agriculture, to extend the franchise. I use subnational variation in South Africa to test this mechanism. I employ national shocks to the mining sector’s demand for native black workers together with cross-sectional variation in labor market competition induced by apartheid to estimate the effect of black labor scarcity on wages, capital intensity, and changes in partisan voting preferences. I find that reductions in the supply of foreign mine labor following the sudden withdrawal of workers from Malawi and Mozambique (and the increased demand for native black workers) increased mechanization on the mines and on farms competing with mines for labor. There is also suggestive evidence that these changes increased support for political reform in districts forced to modernize by the shocks.