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Inequality and stability

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Author Info

  • A. S. Pinto Barbosa
  • Boyan Jovanovic
  • Mark M. Spiegel

Abstract

This paper analyzes how political stability depends on economic factors. Fluctuations in groups' economic capacities and in their abilities to engage in rent-seeking or predatory behavior create periodic incentives for those groups to renege on their social obligations. A constitution remains in force so long as no party wishes to defect to the noncooperative situation, and it is reinstituted as soon as each party finds it to its advantage to revert to cooperation. Partnerships of equals are easier to sustain than are arrangements in which one party is more powerful in some economic or noneconomic trait. In this sense, inequality is bad for social welfare. Surprisingly, perhaps, it is the rich, and not the poor segments of society who in our model pose the threat to the stability of the social order. Using cross-country data, we test and confirm the prediction that most constitutional disruptions should be accompanied by increases in income inequality.

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Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Working Papers in Applied Economic Theory with number 96-08.

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Date of creation: 1996
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Publication status: Published in Annales d'Economie et de Statistique (Oct.-Dec. 1997, no. 48, pp. 15-40)
Handle: RePEc:fip:fedfap:96-08

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Related research

Keywords: Income distribution ; Political science;

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Cited by:
  1. Bénabou, Roland, 1996. "Inequality and Growth," CEPR Discussion Papers 1450, C.E.P.R. Discussion Papers.

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