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Democracy, Inequality and Economic Development: The Case of Pakistan


  • Amir-ud-Din, Rafi
  • Rashid, Abdul
  • Ahmad, Shabbir


In this paper, we made an attempt to understand the costs and benefits of democracy for economic growth in Pakistan by analyzing the relationship between democracy and its various measures. Using instrumental variables and RALS (rth-order autoregressive least squares) estimation techniques, it is shown that during the period 1972-2005, there is only a tenuous and uncertain relationship between democracy and fiscal policy variables like expenditures, revenues and deficit; whereas democracy has no impact at all on the income inequality. Moreover, we observed that the political rights had a significant negative impact on fiscal expenditures, suggesting that with an increase in political rights, the governing institutes begin to feel themselves more accountable and as such are more circumspect in expenditures.

Suggested Citation

  • Amir-ud-Din, Rafi & Rashid, Abdul & Ahmad, Shabbir, 2008. "Democracy, Inequality and Economic Development: The Case of Pakistan," MPRA Paper 26935, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26935

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    References listed on IDEAS

    1. Torsten Persson & Gerard Roland & Guido Tabellini, 2000. "Comparative Politics and Public Finance," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1121-1161, December.
    2. Helliwell, John F., 1994. "Empirical Linkages Between Democracy and Economic Growth," British Journal of Political Science, Cambridge University Press, vol. 24(02), pages 225-248, April.
    3. Barro, Robert J, 1996. "Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
    4. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
    5. 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, Oxford University Press, vol. 115(4), pages 1167-1199.
    6. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
    7. Acemoglu, Daron & Robinson, James A, 2002. "The Political Economy of the Kuznets Curve," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 183-203, June.
    8. Francesco Decarolis, 2003. "Economic Effects of Democracy. An Empirical Analysis," Rivista di Politica Economica, SIPI Spa, vol. 93(6), pages 69-116, November-.
    9. repec:cup:apsrev:v:53:y:1959:i:01:p:69-105_00 is not listed on IDEAS
    10. Chong, Alberto & Calderon, Cesar, 2000. "Institutional Quality and Income Distribution," Economic Development and Cultural Change, University of Chicago Press, vol. 48(4), pages 761-786, July.
    11. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    12. Zafar Iqbal & Rizwana Siddiqui, 1998. "The Impact of Structural Adjustment on Income Distribution in Pakistan A SAM-based Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(4), pages 377-397.
    13. Mark Gradstein & Branko Milanovic, 2000. "Does Liberté = Egalité? A Survey of the Empirical Evidence on the Links between Political Democracy and Income Inequality," CESifo Working Paper Series 261, CESifo Group Munich.
    14. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    15. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    16. Mehboob Ahmad, 2000. "Estimation of Distribution of Income in Pakistan, Using Micro Data," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 807-824.
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    More about this item


    Democracy; Political Rights; Fiscal Expenditures; Economic Growth; Income Inequality; Well-Being;

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • P50 - Economic Systems - - Comparative Economic Systems - - - General


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