Paper No. 07-2007
This paper establishes a simple model of long run economic and political development, which is driven by the inherent technical features of dierent production factors and the political con.icts among factor owners on how to divide the outputs. The main production factor in economy evolves from land to physical capital and then to human capital, which enables their respective owners (landlords, capitalists, and workers) to gain political power in the same sequence, shaping the political development path from monarchy to oligarchy and .nally to democracy with full surage. When it is too costly for any group of factor owners to repress others, political compromise is reached and economic progress is not blocked; otherwise, the political con.icts may lead to economic stagnation.