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Democracy, Inequality and Economic Development: The Case of Pakistan

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  • Amir-ud-Din, Rafi
  • Rashid, Abdul
  • Ahmad, Shabbir

Abstract

In this paper, we made an attempt to understand the costs and benefits of democracy for economic growth in Pakistan by analyzing the relationship between democracy and its various measures. Using instrumental variables and RALS (rth-order autoregressive least squares) estimation techniques, it is shown that during the period 1972-2005, there is only a tenuous and uncertain relationship between democracy and fiscal policy variables like expenditures, revenues and deficit; whereas democracy has no impact at all on the income inequality. Moreover, we observed that the political rights had a significant negative impact on fiscal expenditures, suggesting that with an increase in political rights, the governing institutes begin to feel themselves more accountable and as such are more circumspect in expenditures.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26935.

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Date of creation: 15 Nov 2008
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Handle: RePEc:pra:mprapa:26935

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Keywords: Democracy; Political Rights; Fiscal Expenditures; Economic Growth; Income Inequality; Well-Being;

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  1. Alberto Alesina & Sule Ozler & Nouriel Roubini & Phillip Swagel, 1992. "Political Instability and Economic Growth," NBER Working Papers 4173, National Bureau of Economic Research, Inc.
  2. Torsten Persson & Gerard Roland & Guido Tabellini, 2000. "Comparative Politics and Public Finance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(6), pages 1121-1161, December.
  3. Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, Springer, vol. 1(1), pages 1-27, March.
  4. Francesco Decarolis, 2003. "Economic Effects of Democracy. An Empirical Analysis," Rivista di Politica Economica, SIPI Spa, SIPI Spa, vol. 93(6), pages 69-116, November-.
  5. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, Elsevier, vol. 45(8), pages 1341-1378, August.
  6. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers, Stockholm - International Economic Studies 537, Stockholm - International Economic Studies.
  7. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 7(3), pages 51-69, Summer.
  8. Acemoglu, Daron & Robinson, James A, 2002. "The Political Economy of the Kuznets Curve," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 6(2), pages 183-203, June.
  9. John F. Helliwell, 1992. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc.
  10. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 914-27, October.
  11. Mark Gradstein & Branko Milanovic, 2000. "Does Liberté = Egalité? A Survey of the Empirical Evidence on the Links between Political Democracy and Income Inequality," CESifo Working Paper Series 261, CESifo Group Munich.
  12. Mehboob Ahmad, 2000. "Estimation of Distribution of Income in Pakistan, Using Micro Data," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 39(4), pages 807-824.
  13. Zafar Iqbal & Rizwana Siddiqui, 1998. "The Impact of Structural Adjustment on Income Distribution in Pakistan A SAM-based Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 37(4), pages 377-397.
  14. Acemoglu, Daron & Robinson, James A, 1998. "Why did the West Extend the Franchise? Democracy, Inequality and Growth in Historical Perspective," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1797, C.E.P.R. Discussion Papers.
  15. Chong, Alberto & Calderon, Cesar, 2000. "Institutional Quality and Income Distribution," Economic Development and Cultural Change, University of Chicago Press, vol. 48(4), pages 761-86, July.
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