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Democracy, rural inequality, and education spending
Abstract
Much research suggests democracies invest more in human capital formation than dictatorships. In particular, scholars have suggested that democracies outspend autocracies on education, due to electoral and interest group pressures. However, some democracies spend no more on education - and some spend much less - than autocracies. What explains this variation within democracies? The answer is the influence of landed agricultural elites. Urban industrial elites support human capital investment because it leads to higher rates of return even if wages increase. Yet greater education spending encourages out-migration from the countryside, reducing the supply and increasing the price of agricultural labor. Given the differential impact of education spending across economic sectors, the effect of democracy on education spending may be conditional on the power of landed elites. We test this argument in two ways. First, we run a series of time series cross-sectional regressions on data from 107 countries for the period 1970 to 2000. Second, we conduct a difference-in-difference analysis, comparing countries that democratize at high versus low levels of land inequality, for 73 countries for the same time period. Results confirm a negative relationship between the power of landed elites and investment in public education under democracy, adding important and novel insight into the sources of differences in public-goods spending and human capital investment both within across political regimes.
Because primary education is often conceptualized as a pro-poor redistributive policy, a common argument is that democratization increases its provision. But primary education can also serve the goals of autocrats, including redistribution, promoting loyalty, nation-building, and/or industrialization. To examine the relationship between democratization and education provision empirically, I leverage new datasets covering 109 countries and 200 years. Difference-in-differences and interrupted time series estimates find that, on average, democratization had no or little impact on primary school enrollment rates. When unpacking this average null result, I find that, consistent with median voter theories, democratization can lead to an expansion of primary schooling, but the key condition under which it does—when a majority lacked access to primary schooling before democratization—rarely holds. Around the world, state-controlled primary schooling emerged a century before democratization, and in three-fourths of countries that democratized, a majority already had access to primary education before democratization.
While fixed effects (FE) models are often employed to address potential omitted variables, we argue that these models’ real utility is in isolating a particular dimension of variance from panel data for analysis. In addition, we show through novel mathematical decomposition and simulation that only one-way FE models cleanly capture either the over-time or cross-sectional dimensions in panel data, while the two-way FE model unhelpfully combines within-unit and cross-sectional variation in a way that produces un-interpretable answers. In fact, as we show in this paper, if we begin with the interpretation that many researchers wrongly assign to the two-way FE model—that it represents a single estimate of X on Y while accounting for unit-level heterogeneity and time shocks—the two-way FE specification is statistically unidentified, a fact that statistical software packages like R and Stata obscure through internal matrix processing.
Many scholars point to landholding inequality as a root cause of the “Great Divergence” between rich and poor countries over the last few centuries. Large landowners who fear being eclipsed by the masses or rival industrial elites and seek to preserve social and economic rents underinvest in public goods, block rural-urban migration, and keep peasants poor and subservient. By eliminating large landowners and enabling new policy initiatives, extensive land reform holds potential to vastly and directly improve peasant livelihoods, facilitate human capital formation, and enhance economic and social mobility. We demonstrate that this failed to occur in Peru despite a sweeping land reform that redistributed half of all private land to peasants. Using original localized land reform data and a geographic regression discontinuity design that exploits unevenness in reform implementation, we show that greater land reform intensity in Peru generated more poverty and stunted human development. This occurred because land reform encouraged rural demographic stasis, generated widespread land informality and property rights instability, and reduced political competitiveness. Although the government’s distortionary management of post-reform cooperatives certainly did not maximize their development potential, evidence suggests that Peru’s land reform failed to promote development because of broader inherent features of the reform.
When do economic and political elites demand investment in public goods and services? The prevailing view is that non-democratic governments engage in low levels of government spending and taxation, because elites have interests in low taxation. Non-democracies exhibit significant variation in levels of government spending; the causes of these discrepancies have thus far not been thoroughly examined. I argue that where elites own capital that is conducive to government spending, regimes make higher investments. I test this argument using newly collected data on government spending as well as political and economic characteristics of 110 cities in 19th century Prussia. Using both standard regression models and instrumental variable analysis, I show that the economic needs of the local elites drove local government decisions on public spending.
We investigate whether democracy enhances the skills and knowledge of citizens through improving education quality. This, in turn, could have ramifications for other development outcomes such as economic growth. We offer the first systematic cross-national study on democracy and education quality. Democracy is widely regarded as superior to autocracy in terms of providing access to education, and several studies find that democracy enhances educational enrollment and years of schooling. Yet, we do not know whether democracies provide better education. We argue that democracies should not too readily be expected to outperform autocracies on education quality. First, it is inherently difficult to implement quality-enhancing education reforms, even for well-intentioned (democratic and autocratic) governments with ample resources. Second, education quality is less visible to voters than, e.g., expanding education enrollment, making quality-enhancing policies a less attractive option for office-seeking democratic politicians. We employ a recent dataset comparing international student tests for 128 countries, from 1965 onward. While democracies typically provide “more” education than autocracies, we find no systematic evidence that democracies offer better education. The result is very robust and holds in both cross-section and panel specifications. The null-relationship is not explained simply by democracies providing education access to more (and different types of) children than autocracies, and it appears both in rich and poor and in low- and high-capacity states. We also present relevant nuances: for instance, autocracies display more variation in education quality outcomes than democracies, and we find some evidence that democracy may be associated, more specifically, with better reading skills. In sum, this study provides new insights to the democracy and education literature, where extant studies often report strong links between democracy and various education outcomes not directly related to education quality, and informs literatures linking democracy to development outcomes such as growth via effects on human capital.
This study examines the relationship between democracy and the accumulation of human capital. Specifically, I examine regime type's impact on primary school enrollment in the developing world. The statistical analysis establishes that poor democracies enroll a larger percentage of the school-age population than do their authoritarian counterparts. Models using dichotomous and continuous measures of democracy indicate that the institutions associated with individual rights and electoral competition have an important effect on primary school enrollment. Estimates from a selection bias model that account for education's impact on democracy corroborate the results. One possible explanation is that democratic politicians, facing electoral pressures, are compelled to provide a minimum level of educational opportunity for their citizens. Democracy is often criticized for its inability to insulate politicians from the demands made by society. To the extent that the accumulation of human capital generates economic growth, democracy's inability to withstand popular demands may be an important advantage.
Multiplicative interaction models are common in the quantitative political science literature. This is so for good reason.
Institutional arguments frequently imply that the relationship between political inputs and outcomes varies depending on the
institutional context. Models of strategic interaction typically produce conditional hypotheses as well. Although conditional
hypotheses are ubiquitous in political science and multiplicative interaction models have been found to capture their intuition
quite well, a survey of the top three political science journals from 1998 to 2002 suggests that the execution of these models
is often flawed and inferential errors are common. We believe that considerable progress in our understanding of the political
world can occur if scholars follow the simple checklist of dos and don'ts for using multiplicative interaction models presented
in this article. Only 10% of the articles in our survey followed the checklist.
We create a new dataset to test the influence of land inequality on long-run human capital formation in a global cross-country study and assess the importance of land inequality relative to income inequality. Our results show that early land inequality has a detrimental influence on math and science skills even a century later. We find that this influence is causal, using an instrumental variable (IV) approach with geological, climatic and other variables that are intrinsically exogenous.
A second major contribution of our study is our assessment of the persistence of numerical cognitive skills, which are an important component of modern human capital measures. Early numeracy around 1820 is estimated using the age-heaping strategy. We argue that countries with early investments in
numerical education entered a path-dependency of human capital-intensive industries, including skillintensive agriculture and services. The combined long-run effects of land inequality and human capital path-dependence are assessed for the first time in this article.
This article examines the relationship between democratic representation and spending on education in Latin America. The authors assess the impact that democracy has on the distribution of resources between different levels of schooling and on total spending on education. Specifically, they test whether democratic governments allocate a greater share of resources to primary education, the level that benefits the largest segment of the electorate and that is most critical for human capital formation in developing countries. Using time-series cross-sectional analysis, the authors find that democracies devote a higher percentage of their educational resources to primary education and that they maintain higher absolute spending levels on education in the aggregate, thereby enhancing the prospects of human capital formation.
This article explores the application of ideas about path dependence to the study of national political regime change. It
first reviews the central components of pathdependent explanation, including the concepts of critical juncture and legacy.
This mode of explanation is then employed in the analysis of diverging regime trajectories in Central America during the 19th
and 20th centuries. The article argues that the 19th-century liberal reform period was a critical juncture that locked the
Central American countries onto divergent paths of long-term development, culminanting in sharply contrasting regime outcomes.
A final section puts the argument about Central America in a broader comparative perspective by considering other pathdependent
explanations of regime change.
We examine some issues in the estimation of time-series cross-section models, calling into question the conclusions of many published studies, particularly in the field of comparative political economy. We show that the generalized least squares approach of Parks produces standard errors that lead to extreme overconfidence, often underestimating variability by 50% or more. We also provide an alternative estimator of the standard errors that is correct when the error structures show complications found in this type of model. Monte Carlo analysis shows that these “panel-corrected standard errors” perform well. The utility of our approach is demonstrated via a reanalysis of one “social democratic corporatist” model.
The explanations offered for the contrasting records of long-run growth and development among the societies of North and South America most often focus on institutions. The traditional explanations for the sources of these differences in institutions, typically highlight the significance of national heritage or religion. We, in contrast, argue that a hemispheric perspective across the wide range of colonies established in the New World by the Europeans suggests that although there were many influences, factor endowments or initial conditions had profound and enduring effects on the long-run paths of institutional and economic development followed by the respective economies.
This study examines the effects of globalization, democratization, and
partisanship on social spending in fourteen Latin American countries from
1973 to 1997, using a pooled time-series error-correction model. The
authors examine three sets of issues. First, following debates in
the literature on oecd countries, they want to know whether social
spending has been encouraged or constrained by integration into global
markets. Within this context, they examine the extent to which such
outcomes might be influenced by two additional sets of domestic political
and institutional factors discussed in work on developed countries:
the electoral pressures of democratic institutions and whether or not
popularly based governments are in power.
Does democracy affect the provision of basic services? We advance on existing empirical work on this subject by exploring the potential mechanisms through which a democratic transition may prompt a government to alter provision of basic services to its citizens. In an environment of weak state capacity, in which it is difficult for voters to attribute outcomes to executive actions, we suggest that electoral competition is most likely to lead to changes in
policies where executive action is verifiable. Considering the context of African primary education as an example, we suggest that electoral competition will therefore give governments an incentive to abolish school fees, but it will have less effect on the provision of school inputs, precisely because executive actions on these issues are more difficult to monitor. We evaluate this claim by approaching it in three different ways, using cross-national as well as
individual-level data, including an original data set on primary school fee abolitions. First we show that in Africa, democracies have higher rates of school attendance than nondemocracies. Moreover, evidence suggests that this is primarily due to the fact that democracies are more likely to abolish school fees, not to the fact that they provide more inputs. We then estimate the likelihood that a government will abolish school fees subsequent to an election,
taking account of endogeneity concerns involving election timing. Finally, we use survey data from Kenya to provide evidence suggesting that citizens condition their voting intentions on an outcome that a politician can control directly, in this case abolishing school fees, but not on outcomes over which politicians have much more indirect influence, such as local school quality.
Lagged explanatory variables are commonly used in political science in response to endogeneity concerns in observational data. There exist surprisingly few formal analyses or theoretical results, however, that establish whether lagged explanatory variables are effective in surmounting endogeneity concerns and, if so, under what conditions. We show that lagging explanatory variables as a response to endogeneity moves the channel through which endogeneity biases parameter estimates, supplementing a “selection on observables” assumption with an equally untestable “no dynamics among unobservables” assumption. We build our argument intuitively using directed acyclic graphs and then provide analytical results on the bias of lag identification in a simple linear regression framework. We then use Monte Carlo simulations to show how, even under favorable conditions, lag identification leads to incorrect inferences. We conclude by specifying the conditions under which lagged explanatory variables are appropriate responses to endogeneity concerns.
Previous versions of this paper were presented at the APSA Annual Meeting in Washington, DC, August 28-31, 2014, at the Carlos III-Juan March Institute of Social Sciences, Madrid, November 28, 2014, and at the European University Institute, Fiesole, January 20, 2016. Any remaining omissions are the sole responsibility of the authors. This research project was supported by Riksbankens Jubileumsfond, Grant M13- 0559:1, PI: Staffan I. Lindberg, V-Dem Institute, University of Gothenburg, Sweden; by Swedish Research Council, Grant C0556201, PI: Staffan I. Lindberg, V-Dem Institute, University of Gothenburg, Sweden and Jan Teorell, Department of Political Science, Lund University, Sweden; and by Knut and Alice Wallenberg Foundation to Wallenberg Academy Fellow Staffan I. Lindberg, Grant 2013.0166, V-Dem Institute, University of Gothenburg, Sweden; as well as by internal grants from the Vice-Chancellor’s office, the Dean of the College of social Sciences, and the Department of Political Science at University of Gothenburg. Jan Teorell also wishes to acknowledge support from the Wenner-Gren Foundation and the Fernand Braudel Senior Fellowship at the European University Institute, Florence, which made it possible for him to work on this paper. We performed simulations and other computational tasks using resources provided by the Notre Dame Center for Research Computing (CRC) through the High Performance Computing section and the Swedish National Infrastructure for Computing (SNIC) at the National Supercomputer Centre in Sweden. We specifically acknowledge the assistance of In-Saeng Suh at CRC and Johan Raber at SNIC in facilitating our use of their respective systems.
This meta-analytical review of empirical studies of the impact of schooling on entrepreneurship in selection and performance in developing economies looks at variations impact across specific characteristics of the studies. A marginal year of schooling in developing economies raises enterprise income by an average of 5.5 percent, which is close to the average return in industrial countries. The return varies, however, by gender, rural or urban residence, and the share of agriculture in the economy. Furthermore, more educated workers typically end up in wage employment and prefer nonfarm entrepreneurship to farming. The education effect that separates workers into self-employment and wage employment is stronger for women, possibly stronger in urban areas, and also stronger in the least developed economies, where agriculture is more dominant and literacy rates are lower.
In recent theories of comparative development, the role of institutional differences has been crucial. Yet, what explains comparative institutional evolution? We investigate this issue by studying the coffee exporting economies of Latin America. Although homogeneous in many ways, they experienced radically different paths of economic (and political) development, which is conventionally traced to the differential organization of the coffee industry. We show that the different forms that the coffee economy took in the 19th century was critically determined by the legal environment determining access to land, and that different laws resulted from differences in the nature of political competition and the backgrounds of political elites. Our analysis suggests that explanations of institutional differences that stress economic fundamentals can only be part of the story. At least in the economies that we study, while geography, factor endowments and technology are clearly important, their implications for the institutional structure and thus development are conditional on the form that political competition takes in society. For interesting variations in economic outcomes, endowments are not fate.
Despite considerable normative support, analysts have failed to identify any systematic effects of democracy on domestic policy outputs. Building on a theory of the state as a monopoly producer of public services and establishing a common foundation for studying variations in regimes and their policy consequences, the authors hypothesize that democratic states will earn fewer monopoly rents and produce a higher level of services than autocracies. They test this hypothesis both cross-sectionally and over time for a variety of public health and education indicators. The statistical results strongly support their hypotheses. The authors conclude that democracy has real, substantively important effects on the daily lives and well-being of individuals around the globe.
Higher education policy has been subject to considerable reform in OECD states over the past two decades. Some states have introduced tuition fees, others have massively increased public funding for higher education, and still others remain in stasis, retaining the elitist model with which they began the postwar era. This article develops the argument that higher education policy in the OECD is driven by a set of partisan choices within a trilemma between the level of enrollment, the degree of subsidization, and the overall public cost of higher education. The author develops a formal model of the micromechanisms underlying movements within this trilemma, noting the importance of partisan politics, existing enrollment, tax structure, and access. These propositions are tested statistically on a sample of twenty-two OECD countries and through case histories of higher education reform in England, Sweden, and Germany.
We examine the determinants of social expenditure in an unbalanced pooled time-series analysis for 18 Latin American countries for the period 1970 to 2000. This is the first such analysis of spending in Latin American countries with a full complement of regime, partisanship, state structure, economic, and demographic variables, making our analysis comparable to analyses of welfare states in advanced industrial countries. Democracy matters in the long run both for social security and welfare and for health and education spending, and—in stark contrast to OECD countries—partisanship does not matter. Highly repressive authoritarian regimes retrench spending on health and education, but not on social security.
This paper studies the effect of landownership concentration on school enrollment for nineteenth-century Prussia. Prussia is an interesting laboratory given its decentralized educational system and the presence of heterogeneous agricultural institutions. We find that landownership concentration, a proxy for the institution of serf labor, has a negative effect on schooling. This effect diminishes substantially in the second half of the century. Causality of this relationship is confirmed by introducing soil-texture to identify exogenous farm size variation. Panel estimates further rule out unobserved heterogeneity. We argue that serfdom hampered peasants’ demand for education whereas the successive emancipation triggered a demand thereof.
Empirical studies measuring the impact of globalization on social spending have appeared recently in leading journals. This study seeks to improve upon previous work by (1) employing a more sophisticated and comprehensive measure of financial openness; (2) using a more accurate measure of trade openness based on purchasing power parities; and (3) relying on social spending data that are more complete than those used by previous studies on Latin America. Our estimates suggest that several empirical patterns reported in previous work deserve a second look. We find that trade openness has a positive association with education and social security expenditures, that financial openness does not constrain government outlays for social programs, and that democracy has a strong positive association with social spending, particularly on items that bolster human capital formation.
Democracy is more than just another brake or booster for the economy. We argue that there are significant indirect effects of democracy on growth through public health and education. Where economists use life expectancy and education as proxies for human capital, we expect democracy will be an important determinant of the level of public services manifested in these indicators. In addition to whatever direct effect democracy may have on growth, we predict an important indirect effect through public policies that condition the level of human capital in different societies. We conduct statistical investigations into the direct and indirect effects of democracy on growth using a data set consisting of a 30-year panel of 128 countries. We find that democracy has no statistically significant direct effect on growth. Rather, we discover that the effect of democracy is largely indirect through increased life expectancy in poor countries and increased secondary education in nonpoor countries.
This paper shows that differences in educational outcomes within and between Asia and Latin America are caused in part by the type of agricultural production system. It is argued that, in contrast to states organized around family farming, countries exhibiting plantation-style agriculture tend to neglect broadly based educational policies. Plantation owners may have curtailed educational expansion to impede political mobilization of rural workers in order to secure a cheap supply of hired labour and monopolize the political arena. Results of panel data analysis as well as OLS cross-sectional regressions show that the export of crops grown on large landholdings substantially decreases secondary education attainment levels and governments’ investments in secondary schooling. Simultaneously, these same exports are associated with higher tertiary education levels. The quantitative analysis is complemented by historical evidence of agrarian elites attempting to hinder the development of mass schooling in many countries.
This paper suggests that inequality in the distribution of landownership adversely affected the emergence of human-capital
promoting institutions (e.g. public schooling), and thus the pace and the nature of the transition from an agricultural to an industrial economy, contributing
to the emergence of the great divergence in income per capita across countries. The prediction of the theory regarding the adverse effect of the concentration of landownership on education
expenditure is established empirically based on evidence from the beginning of the 20th century in the U.S.
Politicians who care about the spoils of office may underprovide a public good because its benefits cannot be targeted to voters as easily as pork-barrel spending. We compare a winner-take-all system--where all the spoils go to the winner--to a proportional system--where the spoils of office are split among candidates proportionally to their share of the vote. In a winner-take-all system the public good is provided less often than in a proportional system when the public good is particularly desirable. We then consider the electoral college system and show that it is particularly subject to this inefficiency.
Chapter 21-Democracy, Redistribution, and Inequality
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