The Political Economy of Inclusive Rural Growth

Commentators on the ‘East Asian Miracle’ of inclusive rural growth have often pointed toward shared growth policies. But why were these policies not chosen elsewhere? This paper shows that economies with a stronger middle class may sustain higher productivity through public good provision. We model voters who invest in either subsistence or technologies in which public goods complement private capital. Investment and technology choices vary with wealth and the level of public goods enforced by political lobbies. We show that increased productive possibilities, such as those of an emerging middle class, can further power reforms when money matters in politics.