Democracy and Income Inequality : An Empirical Analysis

Standard political economy theories suggest that democratization has a moderating effect on income inequality. But the empirical literature has failed to uncover any such robust relationship. The authors take another look at the issue. The authors...

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Bibliographic Details
Main Authors:	Gradstein, Mark, Milanovic, Branko, Ying, Yvonne
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	COALITION GOVERNMENTS COMMUNISM COMMUNIST COMMUNIST PARTY COUNTRY DUMMIES COUNTRY EFFECTS CROSS- COUNTRY DIFFERENCES CROSS-COUNTRY REGRESSION DATA SET DECREASING FUNCTION DEMOCRACY DEMOCRATIZATION DEPENDENT VARIABLE DEVELOPMENT DEVELOPMENT ECONOMICS DICTATORSHIP DIFFERENTIAL IMPACT ECONOMIC DEVELOPMENT EGALITARIAN DISTRIBUTION EMPIRICAL ANALYSIS EMPIRICAL ESTIMATION EMPIRICAL LITERATURE EMPIRICAL RESEARCH EMPIRICAL TEST GDP GINI COEFFICIENT GROWTH RATE HUMAN RESOURCES IDEOLOGIES INCOME INCOME DIFFERENCES INCOME DISTRIBUTION INCOME DISTRIBUTIONS INCOME GROUPS INCOME INEQUALITY INCOME LEVEL INCOME LEVELS INCOME REDISTRIBUTION INCREASED INEQUALITY INCREASING FUNCTION INEQUALITY INEQUALITY DATA INEQUALITY MEASURE INEQUALITY MEASURES LABOR SUPPLY LACK OF TRANSPARENCY LEGISLATIVE ELECTIONS LEGISLATURE MEDIAN INCOME MEDIAN VOTER MINISTERS NATIONS NEGATIVE RELATIONSHIP OLIGARCHY PARLIAMENT PER CAPITA GROWTH PER CAPITA GROWTH RATE PER CAPITA INCOME PER CAPITA INCOME LEVELS POLICY RESEARCH POLITICAL ECONOMY POLITICAL INSTITUTIONS POLITICAL PARTIES POLITICAL POWER POLITICAL RIGHTS POLITICAL SCIENTISTS POLITICAL SYSTEM PRESIDENTS PRIME MINISTER PRIME MINISTERS PURCHASING POWER PURCHASING POWER PARITY REFERENDUM REGRESSION ANALYSIS REPUBLICS RESOURCE ALLOCATION REVERSE CAUSALITY REVERSE CAUSATION SAM TAX RATE TAXATION TRANSITION ECONOMIES TRANSPARENCY VETO VETO POWER VOTING WAGES
Online Access:	http://documents.worldbank.org/curated/en/2001/03/1047466/democracy-income-inequality-empirical-analysis http://hdl.handle.net/10986/19685

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Summary:	Standard political economy theories suggest that democratization has a moderating effect on income inequality. But the empirical literature has failed to uncover any such robust relationship. The authors take another look at the issue. The authors argue that prevailing ideology may be an important determinant of inequality and that the democratization effect "works through" ideology. In societies that value equality highly there is less distributional conflict among income groups, so democratization may have only a negligible effect on inequality. But in societies that value equality less, democratization reduces inequality through redistribution as the poor outvote the rich. The authors' cross-country empirical analysis, covering 126 countries in 1960-98, confirms the hypothesis: ideology, as proxied by a country's dominant religion, seems to be related to inequality. In addition, while in Judeo-Christian societies increased democratization appears to lead to lower inequality, in Muslim and Confucian societies it has an insignificant effect. The authors hypothesize that Muslim and Confucian societies rely on informal transfers to reach the desired level of inequality, while Judeo-Christian societies, where family ties are weaker, use political action.

Democracy and Income Inequality : An Empirical Analysis

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