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Inequality and Institutions

  • Alberto Chong


  • Mark Gradstein

This paper presents theory and evidence on the relationship between inequality and institutional quality. We propose a model in which the two dynamically reinforce each other and set out to test this relationship with a broad array of institutional measures. We establish double causality between better institutional quality and a more equal distribution of income, but also demonstrate that the link from the latter dominates the former. These results are shown to be robust to various specifications and different data sources that cover various time-spans.

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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4361.

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Date of creation: Apr 2004
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Handle: RePEc:idb:wpaper:4361
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  1. Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
  2. Glaeser, Edward & Scheinkman, Jose & Shleifer, Andrei, 2003. "The injustice of inequality," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 199-222, January.
  3. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
  4. Edward L. Glaeser & Andrei Shleifer, 2001. "The Rise of the Regulatory State," Harvard Institute of Economic Research Working Papers 1934, Harvard - Institute of Economic Research.
  5. Daniel Kaufmann & Massimo Mastruzzi & Diego Zavaleta, 2003. "Sustained Macroeconomic Reforms, Tepid Growth: A Governance Puzzle in Bolivia?," Development and Comp Systems 0308003, EconWPA.
  6. Konstantin Sonin, 2002. "Why the Rich May Favor Poor Protection of Property Rights," William Davidson Institute Working Papers Series 544, William Davidson Institute at the University of Michigan.
  7. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  8. Gradstein, Mark, 2004. "Inequality, Democracy and the Emergence of Institutions," CEPR Discussion Papers 4187, C.E.P.R. Discussion Papers.
  9. 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, 03.
  10. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  11. Chong, Alberto & Calderon, Cesar, 2000. "Institutional Quality and Income Distribution," Economic Development and Cultural Change, University of Chicago Press, vol. 48(4), pages 761-86, July.
  12. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
  13. Stanley L. Engerman & Kenneth Lee Sokoloff, 2002. "Factor Endowments, Inequality, and Paths of Development among New World Economies," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, August.
  14. Calderon, Cesar & Liu, Lin, 2003. "The direction of causality between financial development and economic growth," Journal of Development Economics, Elsevier, vol. 72(1), pages 321-334, October.
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