Why low provision of public goods

William Easterly
The dominance by an elite who does not support human capital investment in the masses is a theme in several theoretical models in the political economy and growth literature. In the most relevant model for this paper, Bourgignon and Verdier 1999 argue that an "oligarchy" will oppose widespread education because educated peoples are more likely to demand political power, i.e. democracy. Even if the country is already "democratic", more educated peoples will be more likely to be politically active and thus more likely to vote for a redistribution of income and power away from the "oligarchy." Hence, the oligarchy will resist mass education even in a democratic society. Acemoglu and Robinson 1998 also features an equilibrium with concentration of power among the elite and low human capital accumulation among the majority. Gradstein and Justman 1997 in related work find that the same conditions (such as inequality) that work against democracy also work against publicly-funded education.