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Economic downturns, inequality, and democratic improvements

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  • Michael T. Dorsch
  • Paul Maarek

    (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas)

Abstract

This paper explores the extent to which discrete improvements in the democratic quality of political institutions can be explained by income inequality. Empirical tests of this relationship have generally yielded null results, though typically test an unconditional relationship. Guided by a theoretical nuance of the “new economic view” of democratization and using an instrumental variable strategy, we re-examine the relationship conditional on the state of the macroeconomy. We demonstrate that the more unequal are societies, the higher the probability of experiencing democratic improvements following economic downturns. Following growth periods, higher income inequality has a slight negative or null effect on the likelihood of democratic improvement. The conditional result provides a simple explanation for why previous literature has found largely null results concerning inequality and democratization and offers additional evidence in support of the new economic view.
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Suggested Citation

  • Michael T. Dorsch & Paul Maarek, 2020. "Economic downturns, inequality, and democratic improvements," Post-Print hal-04129338, HAL.
  • Handle: RePEc:hal:journl:hal-04129338
    DOI: 10.1016/j.ejpoleco.2020.101856
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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