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Growth, Income Distribution, and Democracy: What the Data Say

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  • Perotti, Roberto

Abstract

This paper investigates the relationship between income distribution, democratic institutions, and growth. It does so by addressing three main issues: the properties and reliability of the income distribution data, the robustness of the reduced form relationship between income distribution and growth estimated so far, and the specific channels through which income distribution affects growth. The main conclusion in this regard is that there is strong empirical support for two types of explanations, linking income distribution to sociopolitical instability and to the education/fertility decision. A third channel, based on the interplay of borrowing constraints and investment in human capital, also seems to receive some support by the data, although it is probably the hardest to test with the existing data. By contrast, there appears to be less empirical support for explanations based on the effects of income distribution on fiscal policy. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    • Handle: RePEc:kap:jecgro:v:1:y:1996:i:2:p:149-87
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    1. Aaron Tornell & Philip Lane, 1994. "Are Windfalls a Curse? A Non-Representative Agent Model of the Current Account and Fiscal Policy," NBER Working Papers 4839, National Bureau of Economic Research, Inc.
    2. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    3. Oded Galor & Hyoungsoo Zang, 1995. "Fertility, income distribution, and economic growth: Theory and cross-country evidence," Working Papers 95-01, Brown University, Department of Economics.
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    8. Benhabib, Jess & Rustichini, Aldo, 1996. "Social Conflict and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 125-142, March.
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    12. Abhijit V. Banerjee & Andrew F. Newman, 1991. "Risk-Bearing and the Theory of Income Distribution," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 211-235.
    13. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(4), pages 755-776.
    14. Galor, Oded & Zang, Hyoungsoo, 1997. "Fertility, income distribution, and economic growth: Theory and cross-country evidence," Japan and the World Economy, Elsevier, vol. 9(2), pages 197-229, May.
    15. Xavier Sala-i-Martin, 1992. "Transfers," NBER Working Papers 4186, National Bureau of Economic Research, Inc.
    16. Alesina, Alberto & Perotti, Roberto, 1994. "The Political Economy of Growth: A Critical Survey of the Recent Literature," The World Bank Economic Review, World Bank, vol. 8(3), pages 351-371, September.
    17. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
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