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How Does Democracy fare with Economic Welfare for a Trading Nation?

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  • Mamoon, Dawood

Abstract

The paper examines how political institutions in comparison to legal, social and economic institutions fare with different measures of inequality in a cross section framework. The empirical analysis suggests that countries which practice democracy are less prone to unequal outcomes especially when it comes to wage inequality and income inequality whereas autocracy is associated with higher level of wage inequalities but its impact on income inequalities are insignificant. Though under good economic management, even autocracies may redistribute incomes from the richest to the poorest, more generally an autocratic set up violates the median voter hypothesis. The results also show that political stability is more sensitive to inequalities than democracy and autocracy which is to say that the countries which are internally politically stable also form more equal societies.

Suggested Citation

  • Mamoon, Dawood, 2008. "How Does Democracy fare with Economic Welfare for a Trading Nation?," MPRA Paper 10433, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:10433
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    File URL: https://mpra.ub.uni-muenchen.de/10433/1/MPRA_paper_10433.pdf
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    References listed on IDEAS

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    1. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
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    More about this item

    Keywords

    Institutions; Trade Liberalisation; Redistribution; Wage Inequality;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • F15 - International Economics - - Trade - - - Economic Integration
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions

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