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Inequality, Development, and the Stability of Democracy – Lipset and Three Critical Junctures in German History

  • Jung, Florian


  • Sunde, Uwe


This paper studies the endogenous emergence of political regimes, in particular democracy, oligarchy and mass dictatorship, in societies in which productive resources are distributed unequally and institutions do not ensure political commitments. The political regime is shown to depend on resource inequality as well as on economic development, reflected in the production structure. The main results imply that for any level of development there exists a distribution of resources such that democracy is the political outcome. This distribution is even independent of the particular development level if the income share generated by the poor is sufficiently large. On the other hand, there are distributions of resources for which democracy is infeasible in equilibrium irrespective of the level of development. The model also delivers results on the stability of democracy. Variations in inequality across several dimensions due to unbalanced technological change, immigration or changes in the demographic structure affect the scope for democracy or may even lead to its breakdown. The results are consistent with the different political regimes that emerged in Germany after its unification in 1871.

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Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1127.

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Length: 52 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:usg:econwp:2011:27
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  1. Morrisson, Christian, 2000. "Historical perspectives on income distribution: The case of Europe," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 4, pages 217-260 Elsevier.
  2. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
  3. Dreze, J H & Greenberg, J, 1980. "Hedonic Coalitions: Optimality and Stability," Econometrica, Econometric Society, vol. 48(4), pages 987-1003, May.
  4. Matteo Cervellati & Piergiuseppe Fortunato & Uwe Sunde, 2008. "Hobbes to Rousseau: Inequality, Institutions and Development," Economic Journal, Royal Economic Society, vol. 118(531), pages 1354-1384, 08.
  5. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2007. "Reevaluating the Modernization Hypothesis," NBER Working Papers 13334, National Bureau of Economic Research, Inc.
  6. Esteban, J. & Ray, D., 1993. "On the Measurement of Polarization," UFAE and IAE Working Papers 221.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  7. Acemoglu,Daron & Robinson,James A., 2006. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521855266.
  8. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
  9. Moreno, Diego & Wooders, John, 1996. "Coalition-Proof Equilibrium," Games and Economic Behavior, Elsevier, vol. 17(1), pages 80-112, November.
  10. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  11. Alberto Alesina & Enrico Spolaore, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1027-1056.
  12. Frechette, Guillaume R. & Kagel, John H. & Morelli, Massimo, 2005. "Gamson's Law versus non-cooperative bargaining theory," Games and Economic Behavior, Elsevier, vol. 51(2), pages 365-390, May.
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  14. repec:oup:restud:v:75:y:2008:i:4:p:987-1009 is not listed on IDEAS
  15. repec:oup:qjecon:v:120:y:2005:i:3:p:1155-1192 is not listed on IDEAS
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