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Democracy and income inequality : an empirical analysis

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  • Gradstein, Mark
  • Milanovic, Branko
  • Ying, Yvonne

Abstract

Standard political economy theories suggest that democratization has a moderating effect on income inequality. But the empirical literature has failed to uncover any such robust relationship. The authors take another look at the issue. The authors argue that prevailing ideology may be an important determinant of inequality and that the democratization effect"works through"ideology. In societies that value equality highly there is less distributional conflict among income groups, so democratization may have only a negligible effect on inequality. But in societies that value equality less, democratization reduces inequality through redistribution as the poor outvote the rich. The authors'cross-country empirical analysis, covering 126 countries in 1960-98, confirms the hypothesis: ideology, as proxied by a country's dominant religion, seems to be related to inequality. In addition, while in Judeo-Christian societies increased democratization appears to lead to lower inequality, in Muslim and Confucian societies it has an insignificant effect. The authors hypothesize that Muslim and Confucian societies rely on informal transfers to reach the desired level of inequality, while Judeo-Christian societies, where family ties are weaker, use political action.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2561.

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Date of creation: 31 Mar 2001
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Handle: RePEc:wbk:wbrwps:2561

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Keywords: Governance Indicators; Inequality; Poverty Impact Evaluation; Human Rights; National Governance;

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References

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Citations

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Cited by:
  1. Lin, Eric S. & Ali, Hamid E., 2009. "Military Spending and Inequality: Panel Granger Causality Test," MPRA Paper 40159, University Library of Munich, Germany.
  2. Uwaifo Oyelere, Ruth, 2007. "Within and Between Gender Disparities in Income and Education Benefits from Democracy," IZA Discussion Papers 3221, Institute for the Study of Labor (IZA).
  3. Branko Milanovic, 2003. "Can We Discern The Effect Of Globalization On Income Distribution? Evidence From Household Surveys," HEW, EconWPA 0310002, EconWPA.
  4. Anneli Kaasa, 2005. "Factors Of Income Inequality And Their Influence Mechanisms: A Theoretical Overview," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 40, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  5. Martin Rama, 2002. "Mondialisation, inégalités et politiques de l'emploi," Revue d’économie du développement, De Boeck Université, vol. 16(1), pages 43-83.
  6. Milanovic, Branko & Hoff, Karla & Horowitz, Shale, 2008. "Political alternation as a restraint on investing in influence : evidence from the post-communist transition," Policy Research Working Paper Series 4747, The World Bank.
  7. Hisako Kai & Shigeyuki Hamori, 2009. "Globalization, financial depth, and inequality in Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 29(3), pages 2025-2037.
  8. Fabrizio Carmignani, 2005. "Efficiency Of Institutions, Political Stability And Income Dynamics," Public Economics, EconWPA 0503007, EconWPA.
  9. Muhammad, Shahbaz & Reza, Sherafatian-Jahromi & Muhammad, Nasir Malik, 2012. "Linkages between Defence Spending and Income Inequality in Iran," MPRA Paper 41983, University Library of Munich, Germany, revised 14 Oct 2012.
  10. Carlyn Dobson & Antonio Rodríguez, 2010. "Is Corruption Really Bad for Inequality? Evidence from Latin America," Development Research Working Paper Series 02/2010, Institute for Advanced Development Studies.
  11. Romuald, Kinda Somlanare, 2011. "Democratic Institutions and Environmental Quality: Effects and Transmission Channels," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 120396, European Association of Agricultural Economists.
  12. Rasha Hashim Osman & Constantinos Alexiou & Persefoni Tsaliki, 2012. "The role of institutions in economic development: Evidence from 27 Sub-Saharan African countries," International Journal of Social Economics, Emerald Group Publishing, vol. 39(2), pages 142-160, January.
  13. Shen, Yan & Yao, Yang, 2008. "Does grassroots democracy reduce income inequality in China?," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2182-2198, October.

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