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Democracy, Ideology And Income Inequality: An Empirical Analysis

  • Branko Milanovic

    (World Bank)

  • Mark Gradstein

    (Ben Gurion University)

  • Yvonne Ying

    (World Bank)

While standard political economy theories suggest a moderating effect of democratization on income inequality, empirical literature has failed to uncover any such robust relationship. Here we take yet another look at this issue arguing first, that prevailing ideology may be an important determinant of inequality and, second, that the democratization effect “works through” ideology. In societies where equality is highly valued there is less of a distributional conflict across income groups, hence democratization may have only a negligible effect on inequality. We find this to be true for Confucian and Communist societies. On the other hand, in societies where equality is not valued as much, democratization reduces inequality through redistribution as the poor outvote the rich. We find this to be the case particularly for Protestand/mixed Christian and societies without a dominant religion. In addition, we find a strong evidence that, controlling for the level of democracy, a type of political system matters too: parliamentary and mixed presidential- parliamentary systems have a more of an inequality reducing effect than the pure presidential.

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Paper provided by EconWPA in its series Public Economics with number 0305002.

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Date of creation: 09 May 2003
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Handle: RePEc:wpa:wuwppe:0305002
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