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Economic security, well functioning courts and a good government

Listed author(s):
  • Dawood Mamoon
Registered author(s):

    Purpose - The purpose of this paper is to define economic security as a country's ability to redistribute incomes through a strong governance structure by practicing rule of law, eliminating corruption and a government that acts as a facilitator by formulating effective fiscal and monetary policy and regulation. Design/methodology/approach - The paper uses two stage instrumental analysis and carries out second order asymptotic tests to establish the validity of the instruments. Findings - The results suggest that courts that implement national laws effectively and punish corruption and a government that has balance budgets and investment friendly monetary policy ensures economic security by means of welfare friendly outcomes that favor the incomes of the poor and middle class. There is also evidence that redistribution takes place from rich to the poor. As a result, income and wage inequalities fall down. Originality/value - The paper adds to the literature on institutions by providing empirical evidence on the relationship between institutions and inequality.

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    File URL: http://www.emeraldinsight.com/10.1108/03068291211238446?utm_campaign=RePEc&WT.mc_id=RePEc
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    Article provided by Emerald Group Publishing in its journal International Journal of Social Economics.

    Volume (Year): 39 (2012)
    Issue (Month): 8 (June)
    Pages: 587-611

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    Handle: RePEc:eme:ijsepp:v:39:y:2012:i:8:p:587-611
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    1. Raul A. Barreto, 2001. "Endogenous Corruption, Inequality and Growth: Econometric Evidence," School of Economics Working Papers 2001-02, University of Adelaide, School of Economics.
    2. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
    3. Sarah Voitchovsky, 2005. "Does the Profile of Income Inequality Matter for Economic Growth?," Journal of Economic Growth, Springer, vol. 10(3), pages 273-296, 09.
    4. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
    5. Sanjeev Gupta, 1998. "Does Corruption Affect Income Inequality and Poverty?," IMF Working Papers 98/76, International Monetary Fund.
    6. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09.
    7. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    8. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
    9. Ruben Segura-Cayuela, 2006. "Inefficient Policies, Inefficient Institutions and Trade," 2006 Meeting Papers 502, Society for Economic Dynamics.
    10. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    11. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    12. Wade, Robert Hunter, 2004. "Is Globalization Reducing Poverty and Inequality?," World Development, Elsevier, vol. 32(4), pages 567-589, April.
    13. Daron Acemoglu, 2003. "The Form of Property Rights: Oligarchic vs. Democratic Societies," NBER Working Papers 10037, National Bureau of Economic Research, Inc.
    14. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 771-799, September.
    15. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
    16. Blair, Harry, 2000. "Participation and Accountability at the Periphery: Democratic Local Governance in Six Countries," World Development, Elsevier, vol. 28(1), pages 21-39, January.
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