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Diversity and the Power of the Elites inDemocraticSocieties: A Model and a Test

  • Oriana Bandiera
  • Gilat Levy

This paper analyzes whether political outcomes in local democracies are determinedby the preferences of the median - typically poor - agents or whether they reflect thewishes of the wealthy elites. A model shows that when politicians belonging todifferent groups can form coalitions, the wealthy elites' influence on policy choices isendogenously higher when there is diversity in preferences among the poor. In linewith the theoretical predictions, the pattern of public good provision by localgovernments in Indonesia reveals that when individuals have different preferences— here due to different ethnicities — democratic policy outcomes are closer to thepreferences of the elites, rather than the preferences of the poor majority.

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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Economic Organisation and Public Policy Discussion Papers Series with number 018.

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Date of creation: Aug 2010
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Handle: RePEc:cep:stieop:018
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