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Efficiency Of Institutions, Political Stability And Income Dynamics

  • Fabrizio Carmignani

    (United Nations Economic Commission for Europe)

In a simple theoretical framework, the quality of institutions affects individual’s investment decisions, and hence income levels and distribution. When institutions deteriorates and inequalities increase, the incumbent undertakes redistributive taxation to maintain political support. The quality of institutions and the extent of redistribution depend on the degree of government responsiveness to citizens and on the credibility of the political opposition to the incumbent. The econometric analysis is based on both single equation models and systems of equations. Good institutions are found to reduce the Gini coefficient and to increase average income, growth, and income of the poor. However, some non-linearites are detected in the institutions-Gini relationship.

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Paper provided by EconWPA in its series Public Economics with number 0503007.

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Length: 27 pages
Date of creation: 22 Mar 2005
Date of revision:
Handle: RePEc:wpa:wuwppe:0503007
Note: Type of Document - pdf; pages: 27
Contact details of provider: Web page: http://econwpa.repec.org

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