Effects of political rivalry on public educational investments and income inequality: evidence from empirical data

In this paper we intend to empirically examine how different political institutions may define the long-term economic development, determined by educational investments and income inequality. With this objective, we assess the impact of political rivalry on four selected macroeconomic variables: public investments in education, individual learning choice, GDP per capita and income inequality, motivated by previous theoretical results. We first construct a composite political rivalry indicator and examine how it varies across different groups of countries. Then, using cross-sectional data, we perform a series of regressions for examining political rivalry effects on the selected variables. Our empirical findings indicate that in lower income countries there is indeed a significant negative impact of political rivalry, which increases with the decrease in the development level. The same is not confirmed for higher-income countries, which may suggest that the relationship between political rivalry and the examined variables may, in fact, be weaker in these countries, or that relevant mechanisms may differ with the level of development.