The political economy of industrialisation

This paper analyses how incentives under different sets of political institutions map into policies that promote industrialisation. I set out an endogenous growth model with non-overlapping generations, where agents are heterogeneous with respect to wealth, skills and political power. The skills of the political elite play a crucial role for industrialisation to occur. It is shown that a flat wealth distribution and a skilled political elite enhance development the most in elitist regimes, while democracies perform as well as elitist regimes in terms of industrialisation. The theoretical results regarding elitist regimes are in line with evidence on the Industrial Revolution.