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Inequality in Developing Economies: The Role of Institutional Development

  • AMENDOLA, Adalgiso

    ()

    (CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy)

  • EASAW, Joshy

    ()

    (Department of Economics, University of Bath)

  • SAVOIA, Antonio

    ()

    (University of Exeter Business School)

This paper studies 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 an influential 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 CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy in its series CELPE Discussion Papers with number 116.

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Length: 51 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:sal:celpdp:0116
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  1. Isaksson, Ann-Sofie, 2008. "Social divisions and institutions: Assessing institutional parameter variation," Working Papers in Economics 282, University of Gothenburg, Department of Economics, revised 01 Aug 2008.
  2. Alberto E. Chong & Mark Gradstein, 2004. "Inequality and Institutions," IDB Publications (Working Papers) 5658, Inter-American Development Bank.
  3. Dani Rodrik, 1998. "Democracies Pay Higher Wages," NBER Working Papers 6364, National Bureau of Economic Research, Inc.
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  8. Adalgiso Amendola & Joshy Easaw & Antonio Savoia, 2011. "Inequality in Developing Economies: The Role of Institutional Development," Discussion Papers 1107, Exeter University, Department of Economics.
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  13. Gradstein. Mark & Milanovic, Branko, 2002. "Does Liberte = Egalite ? A survey of the empirical links between democracy and inequality with some evidence on the transition economies," Policy Research Working Paper Series 2875, The World Bank.
  14. 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.
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  16. Emilie Daudey & Cecilia Garcia-Penalosa, 2007. "The personal and the factor distributions of income in a cross-section of countries," Journal of Development Studies, Taylor & Francis Journals, vol. 43(5), pages 812-829.
  17. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers 73, China Economics and Management Academy, Central University of Finance and Economics.
  18. 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.
  19. Easterly, William, 2007. "Inequality does cause underdevelopment: Insights from a new instrument," Journal of Development Economics, Elsevier, vol. 84(2), pages 755-776, November.
  20. José Cheibub & Jennifer Gandhi & James Vreeland, 2010. "Democracy and dictatorship revisited," Public Choice, Springer, vol. 143(1), pages 67-101, April.
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