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Wealth inequality and democracy

Author

Listed:
  • Sutirtha Bagchi

    (Villanova University)

  • Matthew J. Fagerstrom

    (University of Pennsylvania)

Abstract

Scholars have studied the relationship between land inequality, income inequality, and democracy extensively, but have reached contradictory conclusions that have resulted from competing theories and methodologies. However, despite its importance, the effects of wealth inequality on democracy have not been examined empirically. We use a panel dataset of billionaire wealth from 1987 to 2012 to determine the impact of wealth inequality on the level of democracy. We measure democracy using Polity scores, Varieties of Democracy (V-Dem) indices, and the continuous Machine Learning index. We find limited empirical support for the hypothesis that overall wealth inequality or inherited wealth inequality has an impact on democracy. However, we find evidence that politically connected wealth inequality lowers V-Dem and Machine Learning democracy scores. Following Boix (Democracy and redistribution, Cambridge University Press, New York, 2003), we investigate the hypothesis that capital mobility moderates the relationship between wealth inequality and democracy and find evidence that increased capital mobility mitigates the negative impact of politically connected wealth inequality on democracy.

Suggested Citation

  • Sutirtha Bagchi & Matthew J. Fagerstrom, 2023. "Wealth inequality and democracy," Public Choice, Springer, vol. 197(1), pages 89-136, October.
    • Handle: RePEc:kap:pubcho:v:197:y:2023:i:1:d:10.1007_s11127-023-01082-9
    DOI: 10.1007/s11127-023-01082-9
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    More about this item

    Keywords

    Wealth inequality; Democratization; Capital mobility;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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