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Inequality, Democracy and the Emergence of Institutions

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  • Gradstein, Mark

Abstract

This Paper considers the emergence of institutions as a political outcome, arguing that the support for protection of private property rights is stronger the higher is the economy's aggregate income and the more equal its distribution. When these conditions initially hold, the politically influential rich elite may prefer to relinquish its power through democratization in order to commit future policy-makers to the enforcement of private property rights, thus ensuring larger investment and growth. In a very unequal economy, however, this growth-enhancing democratization will not take place. These conclusions are shown to be consistent with the existing historical and cross-country evidence.

Suggested Citation

  • Gradstein, Mark, 2004. "Inequality, Democracy and the Emergence of Institutions," CEPR Discussion Papers 4187, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4187
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    Cited by:

    1. Perotti, Enrico & Volpin, Paolo, 2004. "Lobbying on Entry," CEPR Discussion Papers 4519, C.E.P.R. Discussion Papers.
    2. Marilene Lorizio & Antonia Rosa Gurrieri, 2017. "Resilient Smes, Institutions And Justice. Evidence In Italy," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 20, pages 131-155, December.
    3. Simplice A. Asongu & Oasis Kodila-Tedika, 2018. "Determinants of Property Rights Protection in Sub-Saharan Africa," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(4), pages 1291-1308, December.
    4. Prabir De, 2010. "Governance, Institutions, and Regional Infrastructure in Asia," Working Papers id:3029, eSocialSciences.
    5. Enrico Perotti & Paolo Volpin, 2007. "Investor Protection and Entry," Tinbergen Institute Discussion Papers 07-006/2, Tinbergen Institute.
    6. Szczepaniak, Małgorzata & Geise, Andrzej & Bariyah, Nurul, 2022. "Impact of institutional determinants on income inequalities in Indonesia during the Era Reformasi," Journal of Asian Economics, Elsevier, vol. 82(C).
    7. Cakal-Velagic Jurdal & Silajdzic Sabina, 2024. "The Effects of Macroeconomic and Financial Development on Income Inequality: Evidence from the Western Balkans," South East European Journal of Economics and Business, Sciendo, vol. 19(1), pages 50-62.
    8. Libman, Alexander, 2007. "Ex ante and ex post institutional convergence: Case of the post-Soviet space," MPRA Paper 10938, University Library of Munich, Germany.
    9. Alberto Chong & Mark Gradstein, 2004. "La desigualdad y las instituciones," Research Department Publications 4362, Inter-American Development Bank, Research Department.
    10. Joseph Keneck Massil, 2016. "Institutions, théories du changement institutionnel et déterminant de la qualité des institutions: les enseignements de la littérature économique," EconomiX Working Papers 2016-4, University of Paris Nanterre, EconomiX.
    11. Gradstein, Mark, 2005. "Democracy, Property Rights, Redistribution and Economic Growth," CEPR Discussion Papers 5130, C.E.P.R. Discussion Papers.
    12. Alberto Chong & Mark Gradstein, 2007. "Inequality and Institutions," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 454-465, August.
    13. Helmi Hamdi, Abdelaziz Hakimi, and Rashid Sbia, 2017. "Finance and Growth Nexus: What Role for Institutions in Developed and Developing Countries?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(4), pages 1-22, December.
    14. Tamara Maria Nae & Margareta-Stela Florescu & Gabriela-Ioana Bălășoiu, 2024. "Towards Social Justice: Investigating the Role of Labor, Globalization, and Governance in Reducing Socio-Economic Inequality within Post-Communist Countries," Sustainability, MDPI, vol. 16(6), pages 1-16, March.

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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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