IDEAS home Printed from https://ideas.repec.org/a/eee/poleco/v35y2014icp52-74.html
   My bibliography  Save this article

Income, inequality, and the stability of democracy — Another look at the Lipset hypothesis

Author

Listed:
  • Jung, Florian
  • Sunde, Uwe

Abstract

This paper studies the endogenous emergence of political regimes, in particular democracy, oligarchy and mass dictatorship, in societies in which productive resources are distributed unequally and institutions do not ensure political commitments. The political regime is shown to depend not only on income levels, but also, in particular, on resource inequality. The main results imply that under any economic environment a distribution of resources exists such that democracy is the political outcome. This distribution is independent of the particular income level if the income share generated by the poor is sufficiently large. On the other hand, there are distributions of resources for which democracy is infeasible in equilibrium regardless of the level of economic development. The model also delivers results on the stability of democracy. Variations in inequality across several dimensions due to unbalanced technological change, immigration or changes in the demographic structure affect the scope for democracy or may even lead to its breakdown. Among other historical examples, the results are consistent with the different political regimes that emerged in Germany after its unification in 1871.

Suggested Citation

  • Jung, Florian & Sunde, Uwe, 2014. "Income, inequality, and the stability of democracy — Another look at the Lipset hypothesis," European Journal of Political Economy, Elsevier, vol. 35(C), pages 52-74.
    • Handle: RePEc:eee:poleco:v:35:y:2014:i:c:p:52-74
    DOI: 10.1016/j.ejpoleco.2014.03.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0176268014000299
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejpoleco.2014.03.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Alberto Alesina & Enrico Spolaore, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1027-1056.
    2. Esteban, Joan & Ray, Debraj, 1994. "On the Measurement of Polarization," Econometrica, Econometric Society, vol. 62(4), pages 819-851, July.
    3. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
    4. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2008. "Coalition Formation in Non-Democracies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(4), pages 987-1009.
    5. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
    6. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1167-1199.
    7. Daron Acemoglu & James A. Robinson, 2008. "Persistence of Power, Elites, and Institutions," American Economic Review, American Economic Association, vol. 98(1), pages 267-293, March.
    8. Sunde, Uwe & Jung, Florian, 2011. "Inequality, Development, and the Stability of Democracy -Lipset and Three Critical Junctures in German History," CEPR Discussion Papers 8406, C.E.P.R. Discussion Papers.
    9. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422.
    10. Barnett,William A. & Moulin,Hervé & Salles,Maurice & Schofield,Norman J. (ed.), 1995. "Social Choice, Welfare, and Ethics," Cambridge Books, Cambridge University Press, number 9780521443401.
    11. Matteo Cervellati & Piergiuseppe Fortunato & Uwe Sunde, 2008. "Hobbes to Rousseau: Inequality, Institutions and Development," Economic Journal, Royal Economic Society, vol. 118(531), pages 1354-1384, August.
    12. Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio & Wacziarg, Romain, 2003. "Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-194, June.
    13. Acemoglu, Daron & Johnson, Simon & Robinson, James A. & Yared, Pierre, 2009. "Reevaluating the modernization hypothesis," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1043-1058, November.
    14. Mark Gradstein, 2007. "Inequality, democracy and the protection of property rights," Economic Journal, Royal Economic Society, vol. 117(516), pages 252-269, January.
    15. Moreno, Diego & Wooders, John, 1996. "Coalition-Proof Equilibrium," Games and Economic Behavior, Elsevier, vol. 17(1), pages 80-112, November.
    16. Humberto Llavador & Robert J. Oxoby, 2005. "Partisan Competition, Growth, and the Franchise," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 1155-1189.
    17. Joan Esteban & Debraj Ray, 2008. "Polarization, Fractionalization and Conflict," Journal of Peace Research, Peace Research Institute Oslo, vol. 45(2), pages 163-182, March.
    18. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
    19. Warwick, Paul V. & Druckman, James N., 2001. "Portfolio Salience and the Proportionality of Payoffs in Coalition Governments," British Journal of Political Science, Cambridge University Press, vol. 31(4), pages 627-649, October.
    20. Frechette, Guillaume R. & Kagel, John H. & Morelli, Massimo, 2005. "Gamson's Law versus non-cooperative bargaining theory," Games and Economic Behavior, Elsevier, vol. 51(2), pages 365-390, May.
    21. Albert Jeck, 1968. "The Trends of Income Distribution in West Germany," International Economic Association Series, in: Jean Marchal & Bernard Ducros (ed.), The Distribution of National Income, chapter 0, pages 78-114, Palgrave Macmillan.
    22. Morrisson, Christian, 2000. "Historical perspectives on income distribution: The case of Europe," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 4, pages 217-260, Elsevier.
    23. Chiaki Moriguchi & Emmanuel Saez, 2008. "The Evolution of Income Concentration in Japan, 1886-2005: Evidence from Income Tax Statistics," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 713-734, November.
    24. Dreze, J H & Greenberg, J, 1980. "Hedonic Coalitions: Optimality and Stability," Econometrica, Econometric Society, vol. 48(4), pages 987-1003, May.
    25. Lipset, Seymour Martin, 1959. "Some Social Requisites of Democracy: Economic Development and Political Legitimacy1," American Political Science Review, Cambridge University Press, vol. 53(1), pages 69-105, March.
    26. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    27. Matteo Cervellati & Florian Jung & Uwe Sunde & Thomas Vischer, 2014. "Income and Democracy: Comment," American Economic Review, American Economic Association, vol. 104(2), pages 707-719, February.
    28. Robert Powell, 2013. "Monopolizing Violence and Consolidating Power," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 807-859.
    29. Michele Piccione & Ariel Rubinstein, 2007. "Equilibrium in the Jungle," Economic Journal, Royal Economic Society, vol. 117(522), pages 883-896, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dorsch, Michael T. & Maarek, Paul, 2020. "Economic downturns, inequality, and democratic improvements," European Journal of Political Economy, Elsevier, vol. 62(C).
    2. Sima, Di & Huang, Fali, 2023. "Is democracy good for growth? — Development at political transition time matters," European Journal of Political Economy, Elsevier, vol. 78(C).
    3. Raouf Boucekkine & Paolo Piacquadio & Fabien Prieur, 2015. "A Lipsetian Theory of Institutional Change," Working Papers hal-02797064, HAL.
    4. Michal Madr, 2016. "Economic Development as a Factor of Democratisation: Evidence from Post-Socialist Economies," MENDELU Working Papers in Business and Economics 2016-70, Mendel University in Brno, Faculty of Business and Economics.
    5. Boucekkine, Raouf & Piacquadio, Paolo G. & Prieur, Fabien, 2019. "A Lipsetian theory of voluntary power handover," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 269-291.
    6. Natalie Obergruber, 2018. "Microeconometric Analysis of Individual and Institutional Determinants of Education and Occupational Choice," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 80.
    7. Sajad Rahimian, 2021. "The Determinants of Democracy Revisited: An Instrumental Variable Bayesian Model Averaging Approach," Papers 2103.04255, arXiv.org.
    8. Vladim'ir Hol'y & Tom'av{s} Evan, 2021. "The Role of a Nation's Culture in the Country's Governance: Stochastic Frontier Analysis," Papers 2102.05411, arXiv.org, revised Apr 2021.
    9. Major G. Coleman, 2016. "At a Loss for Words: Measuring Racial Inequality in America," The Review of Black Political Economy, Springer;National Economic Association, vol. 43(2), pages 177-192, June.
    10. Vladimír Holý & Tomáš Evan, 2022. "The role of a nation’s culture in the country’s governance: Stochastic frontier analysis," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 30(2), pages 507-520, June.
    11. Islam, Md. Rabiul & Madsen, Jakob B. & Raschky, Paul A., 2015. "Gold and silver mining in the 16th and 17th centuries, land titles and agricultural productivity," European Journal of Political Economy, Elsevier, vol. 39(C), pages 150-166.
    12. Raouf Boucekkine & Paolo Giovanni Piacquadio & Fabien Prieur, 2016. "A Lipsetian Theory of Democratization: Development, Education, Inequality, and Resources," CESifo Working Paper Series 6283, CESifo.
    13. Tridimas, George, 2015. "War, disenfranchisement and the fall of the ancient Athenian democracy," European Journal of Political Economy, Elsevier, vol. 38(C), pages 102-117.
    14. Dorsch, Michael T. & Maarek, Paul, 2015. "Inefficient predation and political transitions," European Journal of Political Economy, Elsevier, vol. 37(C), pages 37-48.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sunde, Uwe & Jung, Florian, 2011. "Inequality, Development, and the Stability of Democracy -Lipset and Three Critical Junctures in German History," CEPR Discussion Papers 8406, C.E.P.R. Discussion Papers.
    2. Cervellati Matteo & Fortunato Piergiuseppe & Sunde Uwe, 2012. "Consensual and Conflictual Democratization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-51, December.
    3. Sunde, Uwe & Fortunato, Piergiuseppe & Cervellati, Matteo, 2011. "Democratization and Civil Liberties: The Role of Violence During the Transition," CEPR Discussion Papers 8315, C.E.P.R. Discussion Papers.
    4. Ghosal, Sayantan & Proto, Eugenio, 2009. "Democracy, collective action and intra-elite conflict," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1078-1089, October.
    5. Matteo Cervellati & Piergiuseppe Fortunato & Uwe Sunde, 2008. "Hobbes to Rousseau: Inequality, Institutions and Development," Economic Journal, Royal Economic Society, vol. 118(531), pages 1354-1384, August.
    6. Lagerlöf Nils-Petter, 2012. "A Dynamic Theory of Competence, Loyalty and Stability in Dictatorships," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-39, March.
    7. Robert K. Fleck & F. Andrew Hanssen, 2018. "Path dependence and transitions from tyranny to democracy: evidence from ancient Greece," Constitutional Political Economy, Springer, vol. 29(4), pages 371-388, December.
    8. Roland Hodler, 2018. "The Political Economics Of The Arab Spring," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 821-836, April.
    9. Mulligan, Casey B. & Tsui, Kevin K., 2015. "Political entry, public policies, and the economy," Research in Economics, Elsevier, vol. 69(3), pages 377-397.
    10. Hayo, Bernd & Voigt, Stefan, 2010. "Determinants of constitutional change: Why do countries change their form of government?," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 283-305, September.
    11. Matteo Cervellati & Sunde, Uwe, 2011. "Democratization, Violent Social Conflicts, and Growth," Economics Working Paper Series 1114, University of St. Gallen, School of Economics and Political Science.
    12. Kotschy, Rainer & Sunde, Uwe, 2017. "Democracy, inequality, and institutional quality," European Economic Review, Elsevier, vol. 91(C), pages 209-228.
    13. Thomas Gall & Paolo Masella, 2012. "Markets and jungles," Journal of Economic Growth, Springer, vol. 17(2), pages 103-141, June.
    14. Cervellati, Matteo & Fortunato, Piergiuseppe & Sunde, Uwe, 2014. "Violence during democratization and the quality of democratic institutions," European Economic Review, Elsevier, vol. 66(C), pages 226-247.
    15. BenYishay, Ariel & Betancourt, Roger, 2014. "Unbundling democracy: Political rights and civil liberties," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 552-568.
    16. Christopher J. Ellis & John Fender, 2014. "Public Sector Capital and the Transition from Dictatorship to Democracy," Manchester School, University of Manchester, vol. 82(3), pages 322-346, June.
    17. Dorsch, Michael T. & Maarek, Paul, 2020. "Economic downturns, inequality, and democratic improvements," European Journal of Political Economy, Elsevier, vol. 62(C).
    18. Campante, Filipe R. & Chor, Davin, 2014. "“The people want the fall of the regime”: Schooling, political protest, and the economy," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 495-517.
    19. Markus Brückner & Antonio Ciccone, 2011. "Rain and the Democratic Window of Opportunity," Econometrica, Econometric Society, vol. 79(3), pages 923-947, May.
    20. Markus Brückner & Antonio Ciccone & Andrea Tesei, 2012. "Oil Price Shocks, Income, and Democracy," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 389-399, May.

    More about this item

    Keywords

    Inequality; Income; Democracy; Coalition formation; Factor endowments; Demographic structure;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • H10 - Public Economics - - Structure and Scope of Government - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:35:y:2014:i:c:p:52-74. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505544 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.