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Economic security, well functioning courts and a good government

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  • Dawood Mamoon

Abstract

Purpose – The purpose of this paper is to define economic security as a country's ability to redistribute incomes through a strong governance structure by practicing rule of law, eliminating corruption and a government that acts as a facilitator by formulating effective fiscal and monetary policy and regulation. Design/methodology/approach – The paper uses two stage instrumental analysis and carries out second order asymptotic tests to establish the validity of the instruments. Findings – The results suggest that courts that implement national laws effectively and punish corruption and a government that has balance budgets and investment friendly monetary policy ensures economic security by means of welfare friendly outcomes that favor the incomes of the poor and middle class. There is also evidence that redistribution takes place from rich to the poor. As a result, income and wage inequalities fall down. Originality/value – The paper adds to the literature on institutions by providing empirical evidence on the relationship between institutions and inequality.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal International Journal of Social Economics.

Volume (Year): 39 (2012)
Issue (Month): 8 (July)
Pages: 587-611

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Handle: RePEc:eme:ijsepp:v:39:y:2012:i:8:p:587-611

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Related research

Keywords: Economic stability; Governance; Inequality; Laws; Redistribution;

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References

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  1. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  2. Sarah Voitchovsky, 2005. "Does the Profile of Income Inequality Matter for Economic Growth?," Journal of Economic Growth, Springer, vol. 10(3), pages 273-296, 09.
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  12. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
  13. Sanjeev Gupta, 1998. "Does Corruption Affect Income Inequality and Poverty?," IMF Working Papers 98/76, International Monetary Fund.
  14. Blair, Harry, 2000. "Participation and Accountability at the Periphery: Democratic Local Governance in Six Countries," World Development, Elsevier, vol. 28(1), pages 21-39, January.
  15. Wade, Robert Hunter, 2004. "Is Globalization Reducing Poverty and Inequality?," World Development, Elsevier, vol. 32(4), pages 567-589, April.
  16. Raul A. Barreto, 2001. "Endogenous Corruption, Inequality and Growth: Econometric Evidence," School of Economics Working Papers 2001-02, University of Adelaide, School of Economics.
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