The paper addresses the role of education policies for institutional change. We focus on two contrasting effects of education and human capital accumulation. On the one side, education prompts economic growth and increases the wealth managed by an autocratic elite. On the other side, education increases the awareness of citizens (capturing their reluctance to accept a dictatorship and their labor-market aspirations) and requires the elite to devote more resources to income redistribution. Along the lines of this trade-off, our theory provides a Lipsetian explanation of the positive relationship between education and institutional change, the positive relationship between development and institutional change, and the negative relationship between inequality and institutional change. Furthermore, we obtain new insights on the natural resources curse hypothesis and on the design of development aid programs.