IDEAS home Printed from https://ideas.repec.org/a/eee/poleco/v62y2020ics0176268020300045.html
   My bibliography  Save this article

Economic downturns, inequality, and democratic improvements

Author

Listed:
  • Dorsch, Michael T.
  • Maarek, Paul

Abstract

This paper explores the extent to which discrete improvements in the democratic quality of political institutions can be explained by income inequality. Empirical tests of this relationship have generally yielded null results, though typically test an unconditional relationship. Guided by a theoretical nuance of the “new economic view” of democratization and using an instrumental variable strategy, we re-examine the relationship conditional on the state of the macroeconomy. We demonstrate that the more unequal are societies, the higher the probability of experiencing democratic improvements following economic downturns. Following growth periods, higher income inequality has a slight negative or null effect on the likelihood of democratic improvement. The conditional result provides a simple explanation for why previous literature has found largely null results concerning inequality and democratization and offers additional evidence in support of the new economic view.

Suggested Citation

  • Dorsch, Michael T. & Maarek, Paul, 2020. "Economic downturns, inequality, and democratic improvements," European Journal of Political Economy, Elsevier, vol. 62(C).
  • Handle: RePEc:eee:poleco:v:62:y:2020:i:c:s0176268020300045
    DOI: 10.1016/j.ejpoleco.2020.101856
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0176268020300045
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.ejpoleco.2020.101856?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. 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.
    2. de Haan, Jakob & Sturm, Jan-Egbert, 2017. "Finance and income inequality: A review and new evidence," European Journal of Political Economy, Elsevier, vol. 50(C), pages 171-195.
    3. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    4. Krieger, Tim & Meierrieks, Daniel, 2016. "Political capitalism: The interaction between income inequality, economic freedom and democracy," European Journal of Political Economy, Elsevier, vol. 45(C), pages 115-132.
    5. Easterly, William, 2007. "Inequality does cause underdevelopment: Insights from a new instrument," Journal of Development Economics, Elsevier, vol. 84(2), pages 755-776, November.
    6. 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.
    7. Mejia, Daniel & Posada, Carlos-Esteban, 2007. "Populist policies in the transition to democracy," European Journal of Political Economy, Elsevier, vol. 23(4), pages 932-953, December.
    8. Jan-Egbert Sturm & Jakob De Haan, 2015. "Income Inequality, Capitalism, and Ethno-linguistic Fractionalization," American Economic Review, American Economic Association, vol. 105(5), pages 593-597, May.
    9. Francesco Caselli & Andrea Tesei, 2016. "Resource Windfalls, Political Regimes, and Political Stability," The Review of Economics and Statistics, MIT Press, vol. 98(3), pages 573-590, July.
    10. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
    11. Paul J. Burke & Andrew Leigh, 2010. "Do Output Contractions Trigger Democratic Change?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 124-157, October.
    12. Arezki, Rabah & Brueckner, Markus, 2014. "Effects of International Food Price Shocks on Political Institutions in Low-Income Countries: Evidence from an International Food Net-Export Price Index," World Development, Elsevier, vol. 61(C), pages 142-153.
    13. 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, Oxford University Press, vol. 115(4), pages 1167-1199.
    14. Samuel Bazzi & Christopher Blattman, 2014. "Economic Shocks and Conflict: Evidence from Commodity Prices," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 1-38, October.
    15. Aidt, Toke S. & Jensen, Peter S., 2014. "Workers of the world, unite! Franchise extensions and the threat of revolution in Europe, 1820–1938," European Economic Review, Elsevier, vol. 72(C), pages 52-75.
    16. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
    17. 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.
    18. Dorsch, Michael T. & Maarek, Paul, 2019. "Democratization and the Conditional Dynamics of Income Distribution," American Political Science Review, Cambridge University Press, vol. 113(2), pages 385-404, May.
    19. Freeman, John R. & Quinn, Dennis P., 2012. "The Economic Origins of Democracy Reconsidered," American Political Science Review, Cambridge University Press, vol. 106(1), pages 58-80, February.
    20. Haggard, Stephan & Kaufman, Robert R., 2012. "Inequality and Regime Change: Democratic Transitions and the Stability of Democratic Rule," American Political Science Review, Cambridge University Press, vol. 106(3), pages 495-516, August.
    21. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/generalized method of moments estimation and testing," Stata Journal, StataCorp LP, vol. 7(4), pages 465-506, December.
    22. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, October.
    23. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969, December.
    24. Markus Brückner & Antonio Ciccone, 2011. "Rain and the Democratic Window of Opportunity," Econometrica, Econometric Society, vol. 79(3), pages 923-947, May.
    25. Farzanegan, Mohammad Reza & Witthuhn, Stefan, 2017. "Corruption and political stability: Does the youth bulge matter?," European Journal of Political Economy, Elsevier, vol. 49(C), pages 47-70.
    26. Mark Gradstein & Branko Milanovic, 2004. "Does Libertè = Egalité? A Survey of the Empirical Links between Democracy and Inequality with Some Evidence on the Transition Economies," Journal of Economic Surveys, Wiley Blackwell, vol. 18(4), pages 515-537, September.
    27. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 158-183, December.
    28. Barron, Manuel & Miguel, Edward & Satyanath, Shanker, 2014. "Economic Shocks and Democratization in Africa," Political Science Research and Methods, Cambridge University Press, vol. 2(1), pages 33-47, April.
    29. Martin Gassebner & Michael J. Lamla & James Raymond Vreeland, 2013. "Extreme Bounds of Democracy," Journal of Conflict Resolution, Peace Science Society (International), vol. 57(2), pages 171-197, April.
    30. Edward L. Glaeser & Bryce Millett Steinberg, 2017. "Transforming cities: does urbanization promote democratic change?," Regional Studies, Taylor & Francis Journals, vol. 51(1), pages 58-68, January.
    31. Alberto Alesina & Eliana La Ferrara, 2003. "Ethnic Diversity and Economic Performance," Harvard Institute of Economic Research Working Papers 2028, Harvard - Institute of Economic Research.
    32. Gründler, Klaus & Krieger, Tommy, 2016. "Democracy and growth: Evidence from a machine learning indicator," European Journal of Political Economy, Elsevier, vol. 45(S), pages 85-107.
    33. Lin, Faqin & Sim, Nicholas C.S., 2014. "Baltic Dry Index and the democratic window of opportunity," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 143-159.
    34. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
    35. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    36. Mehdi Shadmehr & Peter Haschke, 2016. "Youth, Revolution, And Repression," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 778-793, April.
    37. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    38. Corneo, Giacomo & Neher, Frank, 2015. "Democratic redistribution and rule of the majority," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 96-109.
    39. Fearon, James D. & Laitin, David D., 2003. "Ethnicity, Insurgency, and Civil War," American Political Science Review, Cambridge University Press, vol. 97(1), pages 75-90, February.
    40. Toke S. Aidt & Raphaël Franck, 2015. "Democratization Under the Threat of Revolution: Evidence From the Great Reform Act of 1832," Econometrica, Econometric Society, vol. 83, pages 505-547, March.
    41. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
    42. Dorsch Michael T. & Maarek Paul, 2014. "A Note on Economic Inequality and Democratization," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(4), pages 1-12, December.
    43. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," LIS Working papers 496, LIS Cross-National Data Center in Luxembourg.
    44. 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.
    45. Robert Deacon, 2009. "Public good provision under dictatorship and democracy," Public Choice, Springer, vol. 139(1), pages 241-262, April.
    46. Timur Kuran, 1989. "Sparks and prairie fires: A theory of unanticipated political revolution," Public Choice, Springer, vol. 61(1), pages 41-74, April.
    47. Ansell,Ben W. & Samuels,David J., 2014. "Inequality and Democratization," Cambridge Books, Cambridge University Press, number 9781107000360, October.
    48. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242, June.
    49. 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.
    50. Toke S. Aidt & Gabriel Leon, 2016. "The Democratic Window of Opportunity," Journal of Conflict Resolution, Peace Science Society (International), vol. 60(4), pages 694-717, June.
    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. Lewkowicz, Jacek & Woźniak, Michał & Wrzesiński, Michał, 2022. "COVID-19 and erosion of democracy," Economic Modelling, Elsevier, vol. 106(C).
    2. Chia, Poh San & Law, Siong Hook & Trinugroho, Irwan & Wiwoho, Jamal & Damayanti, Sylviana Maya & Sergi, Bruno S., 2022. "Dynamic linkages among transparency, income inequality and economic growth in developing countries: Evidence from panel vector autoregressive (PVAR) model," Research in International Business and Finance, Elsevier, vol. 60(C).
    3. Gründler, Klaus & Krieger, Tommy, 2021. "Using Machine Learning for measuring democracy: A practitioners guide and a new updated dataset for 186 countries from 1919 to 2019," European Journal of Political Economy, Elsevier, vol. 70(C).
    4. Michael A. Nelson & Rajeev K. Goel, 2023. "Spillovers from gender equality onto economic equality: Evidence from 162 nations," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(6), pages 1365-1388, August.
    5. Antonio Ciccone & Adilzhan Ismailov, 2022. "Rainfall, Agricultural Output and Persistent Democratization," Economica, London School of Economics and Political Science, vol. 89(354), pages 229-257, April.
    6. Gründler, Klaus & Krieger, Tommy, 2021. "Using machine learning for measuring democracy: An update," ZEW Discussion Papers 21-012, ZEW - Leibniz Centre for European Economic Research.
    7. Janus, Thorsten, 2023. "Short and long run democracy diffusion," European Journal of Political Economy, Elsevier, vol. 78(C).

    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. Paul Maarek & Michael T. Borsch, 2014. "Recessions, Inequality, and Democratization," THEMA Working Papers 2014-19, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    2. Dorsch, Michael T. & Maarek, Paul, 2019. "Democratization and the Conditional Dynamics of Income Distribution," American Political Science Review, Cambridge University Press, vol. 113(2), pages 385-404, May.
    3. Dorsch Michael T. & Maarek Paul, 2014. "A Note on Economic Inequality and Democratization," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(4), pages 1-12, December.
    4. Rainer Kotschy & Uwe Sunde, 2021. "Income Shocks, Inequality, and Democracy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 295-326, January.
    5. Aidt, Toke S. & Albornoz, Facundo & Gassebner, Martin, 2018. "The golden hello and political transitions," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 157-173.
    6. Thorsten Janus & Daniel Riera‐Crichton & Brittany Tarufelli, 2022. "Commodity terms of trade shocks and political transitions," Economics and Politics, Wiley Blackwell, vol. 34(3), pages 465-493, July.
    7. Marino, Maria & Donni, Paolo Li & Bavetta, Sebastiano & Cellini, Marco, 2020. "The democratization process: An empirical appraisal of the role of political protest," European Journal of Political Economy, Elsevier, vol. 63(C).
    8. Antonio Ciccone & Adilzhan Ismailov, 2022. "Rainfall, Agricultural Output and Persistent Democratization," Economica, London School of Economics and Political Science, vol. 89(354), pages 229-257, April.
    9. 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.
    10. 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.
    11. Kammas, Pantelis & Sarantides, Vassilis, 2019. "Do dictatorships redistribute more?," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 176-195.
    12. Ivar Kolstad & Arne Wiig, 2014. "Diversification and democracy," CMI Working Papers 9, CMI (Chr. Michelsen Institute), Bergen, Norway.
    13. Michael Dorsch & Karl Dunz & Paul Maarek, 2015. "Macro shocks and costly political action in non-democracies," Public Choice, Springer, vol. 162(3), pages 381-404, March.
    14. Tian, Jilin & Sim, Nicholas & Yan, Wenshou & Li, Yanyun, 2020. "Trade uncertainty, income, and democracy," Economic Modelling, Elsevier, vol. 90(C), pages 21-31.
    15. Aidt, Toke S. & Jensen, Peter S., 2014. "Workers of the world, unite! Franchise extensions and the threat of revolution in Europe, 1820–1938," European Economic Review, Elsevier, vol. 72(C), pages 52-75.
    16. Dario Debowicz & Alex Dickson & Ian A. MacKenzie & Petros G. Sekeris, 2023. "Income and the (eventual) rise of democracy," Discussion Papers Series 661, School of Economics, University of Queensland, Australia.
    17. Dorsch, Michael T. & Maarek, Paul, 2015. "Inefficient predation and political transitions," European Journal of Political Economy, Elsevier, vol. 37(C), pages 37-48.
    18. Gründler, Klaus & Krieger, Tommy, 2022. "Should we care (more) about data aggregation?," European Economic Review, Elsevier, vol. 142(C).
    19. Klaus Gründler & Tommy Krieger, 2019. "Should We Care (More) About Data Aggregation? Evidence from Democracy Indices," CESifo Working Paper Series 7480, CESifo.
    20. Thomas Apolte & Lena Gerling, 2018. "Youth bulges, insurrections and labor-market restrictions," Public Choice, Springer, vol. 175(1), pages 63-93, April.

    More about this item

    Keywords

    Democratization; Distributive conflict; Inequality; Window of opportunity;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

    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:62:y:2020:i:c:s0176268020300045. 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.