Education and Growth

Peter Lindert argues that there is a relationship between democracy and economic growth. However, very few studies confirm this link empirically. One of the reasons why this is the case is that they do not specify the political process in enough details. The nature of policies that will be chosen and implemented in equilibrium will depend on whether voters have 'voice' or not. If voters have voice then government will spend more on public goods that benefit masses rather than elites. Does having a democracy or extensive franchise ensure that voters will have voice? Not necessarily.

Let us measure the elitist bias in government spending policies. If voters have voice then the government will spend more schools than on higher education and we will find the proportion of spending on schools in total spending higher relative to a situation where voters do not have voice. Thus, higher voice means more spending on primary education and hence lower elitist bias. How do various democracies fare on this count? All the economically successful democracies spend significant portion of their education expenditure on primary education than higher education. This signifies lower elitist bias and hence better human capital and hence growth. What is the catch? Yes, you got it right-its India.

India is the biggest but also the poorest democracy in the world. It turns out that among million reasons why India is poor, the elitist bias in its spending policies infact might be a significant one. We have an impressive list of higher education institutions but our primary schools remain of abysmal quality and quantity. As a result we have some 200 million people with access to somewhat decent higher education but remaining 800 million or so have to survive on schools with one class room and absent teachers!

Lindert argues that even though India is a full fledged democracy by all standards, its voters do not have voice or voice is distributed more unequally than votes. So while other economically successful democracies got it right in terms of primary education, India lags behind because of a massive illiterate and undereducated human pool. So whats the moral of the story? Massively expand and improve schooling in India.

This is important because all other policies of ensuring equal access do not work or work only in the limited sense if basic education is not right. For example in a recent article in EPW, Chakravarty and Somananthan found that SC/ST students earn significantly lower wages in IIMA's placements. However, the difference between the wages of SC/ST and open category candidates vanishes once controlled for the GPA. Thus, the wage differentials account for differences in human capital endowments of the SC/ST versus the open category students. These inequalitties in endowments can be taken care of only if all the castes have access to quality education and a way to do that is to spend more on schools than on universities and colleges.


Chakravarty S and S Somanathan (2008), Discrimination in an Elite Labor Market? Job Placements at IIM-Ahmedabad, Economic and Political Weekly, November 1.

Lindert P (2003), Voice and Growth: Was Churchill Right?, The Journal of Economic History, 63, 2, 315-350.