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Inequality, Privatization and Democratic Institutions in Developing Countries

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Listed:
  • Lidia Ceriani
  • Simona Scabrosetti
  • Francesco Scervini

Abstract

According to the existing theoretical literature, there are several channels through which privatization of State-owned enterprises and assets may shape the distribution of income, either increasing or decreasing the level of inequality. Assessing the actual distributional impact of privatization becomes therefore an empirical matter. This paper is a first attempt to empirically investigate the relationship between privatization and income inequality through redistribution, focusing on the role of democratic institutions in developing countries. Using an unbalanced panel of lowand middle-countries in the period 1988-2008, we find that an increase in privatization revenue is negatively and significantly correlated with net-income inequality when democratic institutions are well consolidated. All the robustness checks we perform confirm this finding. Thus, our analysis seems to suggest that, in developing countries, policy makers's choice of implementing divestiture programs while democratizing at the same time may lead to an improvement in income equality.

Suggested Citation

  • Lidia Ceriani & Simona Scabrosetti & Francesco Scervini, 2018. "Inequality, Privatization and Democratic Institutions in Developing Countries," Working Papers 118, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
  • Handle: RePEc:don:donwpa:118
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    References listed on IDEAS

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    2. Bennett, Daniel L. & Nikolaev, Boris, 2016. "Factor endowments, the rule of law and structural inequality," Journal of Institutional Economics, Cambridge University Press, vol. 12(4), pages 773-795, December.
    3. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 771-799, September.
    4. Bennell, Paul, 1997. "Privatization in Sub-Saharan Africa: Progress and prospects during the 1990s," World Development, Elsevier, vol. 25(11), pages 1785-1803, November.
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    More about this item

    Keywords

    Inequality; Democracy; Privatization; Developing countries;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P5 - Economic Systems - - Comparative Economic Systems

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