Working Paper (with Philippe Aghion, Torsten Persson and Dorothee Rouzet). Revise and Resubmit, Journal of European Economic Association.
Motivated by historical evidence on the relation between military threats and expansions of primary education, we assemble a novel panel dataset from the last 150 years in European countries and from the postwar period in a large set of countries. We find empirically that (i) investments in education increase in response to military threats, (ii) democracy has a negative direct effect on education investments, and, (iii) education investments in better democracies respond more to military threats. These empirical results continue to hold when we instead exploit rivalries in a certain country's immediate neighborhood as an alternative source of variation. To help us interpret these patterns in the data, we develop a theoretical model which is consistent with the three empirical findings. The model has an additional prediction about investments in physical infrastructures, which we also take to the data.