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Inequality And Property Rights, Revisited

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  • Bazoumana Ouattara
  • Samuel Standaert

    ()

Abstract

While the importance of institutions for growth and development has been firmly established, empirical assessments of their effect on income distributions remain largely inconclusive. In this study we revisit this issue, looking in particular at how property rights affect inequality. To this end, we use a state-space model to combine all available indicators tracking the protection of property rights into an index that covers 190 countries over the period 1994-2014. Using dynamic panel estimations based on the GMM-system and the X-differencing techniques, we find that increases in property rights translate into a worsening of distributional outcome. In line with existing studies, we find no strong evidence to show that democracy exerts an independent, direct effect on net income inequality. However, the estimated coefficient of the interaction term between property rights and democracy is negative and statistically significant; thus suggesting that in high democracies, property rights significantly decrease net-income inequality. These effects effects seem to play through the government’s redistribution as market-income inequality is not affected by property rights, democracy or their interaction. Our findings remain robust to specification, methodology, data structure and sample changes.

Suggested Citation

  • Bazoumana Ouattara & Samuel Standaert, 2017. "Inequality And Property Rights, Revisited," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 17/935, Ghent University, Faculty of Economics and Business Administration.
  • Handle: RePEc:rug:rugwps:17/935
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    File URL: http://wps-feb.ugent.be/Papers/wp_17_935.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Inequality; Property rights; Institutions; Dynamic panel; State-space model;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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