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Inequality in developing economies: The role of institutional development

  • Joshy Easaw

    (University of Bath)

  • Antonio Savoia


    (University of Reading and Universit√° di Salerno)

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    In the present paper we study the distributive impact of institutional change in developing countries. In such economies, economic institutions, such as property rights systems, may act to preserve the interests of a rich minority, but this depends crucially on the level of political equality. For example, dominant classes can control key-markets, access to assets and investment opportunities, especially if they enjoy disproportionate political power. We test this hypothesis using cross-section and panel data methods on a sample of low- and middle-income economies from Africa, Asia and Latin America. Results suggest that: (a) increasing the protection of property rights increases income inequality; (b) such an effect is larger in low-democracy environments; (c) a minority of countries have developed a set political institutions capable of counterbalancing this effect.

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    Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 121.

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    Length: 32 pages
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:inq:inqwps:ecineq2009-121
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