Polarization, Politics, and Property Rights : Links between Inequality and Growth

Most efforts to trace the effects of income inequality on growth have focused on redistribution. However, empirical investigation has not substantiated either the positive association of income inequality with redistribution or the negative associa...

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Bibliographic Details
Main Authors:	Keefer, Philip, Knack, Stephen
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ABSOLUTE VALUE AGRICULTURE ASSET INEQUALITY BANKRUPTCY BUREAUCRACY BUREAUCRATIC DELAYS BUREAUCRATIC QUALITY BUREAUCRATIC STRUCTURE BUSINESS ENVIRONMENT CIVIL LIBERTIES COMPETITION POLICY CORRUPTION COUNTRY COVERAGE COUNTRY INVESTIGATIONS CRISES DECISION MAKING DEPENDENT VARIABLE DEVALUATION ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIES OF SCALE EMPIRICAL RESULTS EMPIRICAL STUDIES EMPIRICAL SUPPORT ENFORCEABILITY EQUILIBRIUM ETHNIC HETEROGENEITY ETHNIC HOMOGENEITY ETHNIC TENSION EXOGENOUS SHOCKS EXPENDITURES GDP GINI COEFFICIENT GOVERNMENT DECISION MAKING IMPACT OF INEQUALITY INCOME INCOME DIFFERENCES INCOME DISTRIBUTIONS INCOME INEQUALITY INCOME INEQUALITY DATA INCOME LEVELS INCOMES INCREASE GROWTH INCREASING INCOME INEQUALITY INDIVIDUAL COUNTRIES INEQUALITY DATA INEQUALITY OBSERVATIONS INFORMATION ASYMMETRIES INSTITUTIONAL ARRANGEMENTS LABOR FORCE LAND INEQUALITY LEGISLATION LINEAR RELATIONSHIP MEASURED INEQUALITY MEASUREMENT ERROR MEDIAN VOTER MEDIAN VOTER THEOREM MIDDLE CLASS NATIONAL DEFENSE NEGATIVE EFFECT NEGATIVE RELATIONSHIP 0 HYPOTHESIS OIL PER CAPITA INCOME POLARIZATION MEASURES POLARIZED SOCIETIES POLICY CHANGE POLICY CHANGES POLICY ENVIRONMENT POLICY IMPLICATIONS POLICY ISSUES POLICY MAKERS POLICY MAKING POLICY OUTCOMES POLICY REFORMS POLICY RESEARCH POLITICAL DEVELOPMENT POLITICAL FREEDOMS POLITICAL SCIENCE POLITICAL SCIENCE LITERATURE PRIVATE PROPERTY PRIVATE SECTOR PRODUCTION PROCESSES PROPERTY RIGHTS QUALITY REDISTRIBUTIVE POLICIES RULE OF LAW SECURE PROPERTY RIGHTS SUBJECTIVE EVALUATIONS TAX RATES TAX REVENUES TRADEOFFS UNEQUAL DISTRIBUTION VOTERS WAGES
Online Access:	http://documents.worldbank.org/curated/en/2000/08/693337/polarization-politics-property-rights-links-between-inequality-growth http://hdl.handle.net/10986/19802

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Summary:	Most efforts to trace the effects of income inequality on growth have focused on redistribution. However, empirical investigation has not substantiated either the positive association of income inequality with redistribution or the negative association of redistribution with economic growth. The authors analyze the effects of inequality in the broader context of social polarization. They argue that social polarization, whether rooted in income inequality or in ethnic tension, makes large changes in current policies (including those guaranteeing the security of contract and property rights) more likely under a wide range of institutional arrangements. The resulting uncertainties in the policy and contractual environment hinder growth. They find strong empirical support for both parts of this argument. The policy implications of their argument are quite distinct from those of arguments that inequality reduces growth by increasing pressures for redistribution. If redistributive policies per se were to blame for the low growth resulting from inequality, governments that seek to mitigate income inequality must inevitably confront a tradeoff between equity and growth. If, on the other hand, the insecurity of property rights slows growth in unequal or otherwise polarized societies, governments that commit over the long run to particular redistributive policies incur less risk of slowing economic growth. Fiscal redistribution that reduces inequality may actually increase growth by reducing the risks of political uncertainty.

Polarization, Politics, and Property Rights : Links between Inequality and Growth

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