IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/4187.html
   My bibliography  Save this paper

Inequality, Democracy and the Emergence of Institutions

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP4187
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gradstein, Mark, 2002. "Rules, stability, and growth," Journal of Development Economics, Elsevier, vol. 67(2), pages 471-484, April.
    2. 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, June.
    3. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-739, September.
    4. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1203-1250.
    5. Sonin, Konstantin, 2003. "Why the rich may favor poor protection of property rights," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 715-731, December.
    6. Konrad, Kai A., 2002. "Investment in the absence of property rights; the role of incumbency advantages," European Economic Review, Elsevier, vol. 46(8), pages 1521-1537, September.
    7. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
    8. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    9. Keefer, Philip & Knack, Stephen, 2002. "Polarization, Politics and Property Rights: Links between Inequality and Growth," Public Choice, Springer, vol. 111(1-2), pages 127-154, March.
    10. Glaeser, Edward & Scheinkman, Jose & Shleifer, Andrei, 2003. "The injustice of inequality," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 199-222, January.
    11. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1167-1199.
    12. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-1288, December.
    13. Engerman, Stanley L. & Sokoloff, Kenneth L., 2005. "The Evolution of Suffrage Institutions in the New World," The Journal of Economic History, Cambridge University Press, vol. 65(4), pages 891-921, December.
    14. A. Chong & C. Calderón, 2000. "Causality and Feedback Between Institutional Measures and Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 69-81, March.
    15. Easterly, William, 2001. "The Middle Class Consensus and Economic Development," Journal of Economic Growth, Springer, vol. 6(4), pages 317-335, December.
    16. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    17. Bertocchi, Graziella & Spagat, Michael, 2001. "The Politics of Co-optation," Journal of Comparative Economics, Elsevier, vol. 29(4), pages 591-607, December.
    18. 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.
    19. Graziella Bertocchi, 2006. "The Law of Primogeniture and the Transition from Landed Aristocracy to Industrial Democracy," Journal of Economic Growth, Springer, vol. 11(1), pages 43-70, March.
    20. Stanley L. Engerman & Kenneth Lee Sokoloff, 2002. "Factor Endowments, Inequality, and Paths of Development Among New World Economies," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2002), pages 41-110, August.
    21. Abhijit Banerjee & Dilip Mookherjee & Kaivan Munshi & Debraj Ray, 2001. "Inequality, Control Rights, and Rent Seeking: Sugar Cooperatives in Maharashtra," Journal of Political Economy, University of Chicago Press, vol. 109(1), pages 138-190, February.
    22. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 239-280, April.
    23. Lipset, Seymour Martin, 1959. "Some Social Requisites of Democracy: Economic Development and Political Legitimacy1," American Political Science Review, Cambridge University Press, vol. 53(1), pages 69-105, March.
    24. William Easterly, 2002. "Inequality Does Cause Underdevelopment," Working Papers 1, Center for Global Development.
    25. Mr. Arvind Subramanian & Mr. Francesco Trebbi & Mr. Dani Rodrik, 2002. "Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development," IMF Working Papers 2002/189, International Monetary Fund.
    26. Fleck, Robert K & Hanssen, F Andrew, 2006. "The Origins of Democracy: A Model with Application to Ancient Greece," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 115-146, April.
    27. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    28. Gradstein, Mark, 2002. "Governance and Growth," CEPR Discussion Papers 3270, C.E.P.R. Discussion Papers.
    29. Olson, Mancur, 1993. "Dictatorship, Democracy, and Development," American Political Science Review, Cambridge University Press, vol. 87(3), pages 567-576, September.
    30. Mark Gradstein, 1995. "Intensity Of Competition, Entry And Entry Deterrence In Rent Seeking Contests," Economics and Politics, Wiley Blackwell, vol. 7(1), pages 79-91, March.
    31. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    32. Konrad, Kai A & Skaperdas, Stergios, 1998. "Extortion," Economica, London School of Economics and Political Science, vol. 65(260), pages 461-477, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Perotti, Enrico & Volpin, Paolo, 2004. "Lobbying on Entry," CEPR Discussion Papers 4519, C.E.P.R. Discussion Papers.
    2. Alberto Chong & Mark Gradstein, 2007. "Inequality and Institutions," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 454-465, August.
    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. 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.
    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," Working Papers hal-04141607, HAL.
    11. Gradstein, Mark, 2005. "Democracy, Property Rights, Redistribution and Economic Growth," CEPR Discussion Papers 5130, C.E.P.R. Discussion Papers.
    12. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nobuhiro Mizuno & Katsuyuki Naito & Ryosuke Okazawa, 2017. "Inequality, extractive institutions, and growth in nondemocratic regimes," Public Choice, Springer, vol. 170(1), pages 115-142, January.
    2. Andrea Asoni, 2008. "Protection Of Property Rights And Growth As Political Equilibria," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 953-987, December.
    3. Alberto Chong & Mark Gradstein, 2007. "Inequality and Institutions," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 454-465, August.
    4. Djankov, Simeon & Glaeser, Edward & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2003. "The new comparative economics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 595-619, December.
    5. Ahmet Faruk AYSAN & Mustapha Kamel NABLI & Marie‐Ange VÉGANZONÈS‐VAROUDAKIS, 2007. "Governance Institutions And Private Investment: An Application To The Middle East And North Africa," The Developing Economies, Institute of Developing Economies, vol. 45(3), pages 339-377, September.
    6. Abdoul’ Mijiyawa, 2013. "Determinants of property rights institutions: survey of literature and new evidence," Economics of Governance, Springer, vol. 14(2), pages 127-183, May.
    7. Richard Bluhm & Adam Szirmai, 2011. "Institutions, Inequality and Growth: A review of theory and evidence on the institutional determinants of growth and inequality," Papers inwopa634, Innocenti Working Papers.
    8. Aysan, Ahmet Faruk & Nabli, Mustapha Kamel & Veganzones-Varoudakis, Marie-Ange, 2006. "Governance and private investment in the Middle East and North Africa," Policy Research Working Paper Series 3934, The World Bank.
    9. Uwe Sunde, 2006. "Wirtschaftliche Entwicklung und Demokratie – Ist Demokratie ein Wohlstandsmotor oder ein Wohlstandsprodukt?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(4), pages 471-499, November.
    10. Cervellati Matteo & Fortunato Piergiuseppe & Sunde Uwe, 2012. "Consensual and Conflictual Democratization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-51, December.
    11. Neelum Nigar, 2015. "The Composite Impact of Institutional Quality and Inequality on Economic Growth," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(4), pages 779-791.
    12. Robert MacCulloch & Silvia Pezzini, 2010. "The Roles of Freedom, Growth, and Religion in the Taste for Revolution," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 329-358, May.
    13. Ahmet Faruk Aysan & …mer Faruk Baykal & Marie-Ange Véganzonès–Varoudakis, 2011. "The Effects of Convergence in Governance on Capital Accumulation in the Black Sea Economic Cooperation Countries," Chapters, in: Mehmet Ugur & David Sunderland (ed.), Does Economic Governance Matter?, chapter 6, Edward Elgar Publishing.
    14. Timothy Besley & Torsten Persson, 2011. "Pillars of Prosperity: The Political Economics of Development Clusters," Economics Books, Princeton University Press, edition 1, number 9624.
    15. Gradstein, Mark, 2005. "Democracy, Property Rights, Redistribution and Economic Growth," CEPR Discussion Papers 5130, C.E.P.R. Discussion Papers.
    16. Besley, Timothy & Ghatak, Maitreesh, 2010. "Property Rights and Economic Development," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4525-4595, Elsevier.
    17. Holger Strulik, 2008. "Social composition, social conflict and economic development," Economic Journal, Royal Economic Society, vol. 118(530), pages 1145-1170, July.
    18. Lopez-Uribe, Maria del Pilar & Castells-Quintana, David & McDermott, Thomas K. J., 2017. "Geography, institutions and development: a review ofthe long-run impacts of climate change," LSE Research Online Documents on Economics 65147, London School of Economics and Political Science, LSE Library.
    19. Ann-Sofie Isaksson, 2011. "Social divisions and institutions: assessing institutional parameter variation," Public Choice, Springer, vol. 147(3), pages 331-357, June.
    20. Haggard, Stephan & Tiede, Lydia, 2011. "The Rule of Law and Economic Growth: Where are We?," World Development, Elsevier, vol. 39(5), pages 673-685, May.

    More about this item

    Keywords

    Inequality; Democracy; Property rights;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:4187. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.