Diversity and the Power of the Elites in Democratic Societies: A Model and a Test

36 Pages Posted: 30 Nov 2010  

Oriana Bandiera

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Gilat Levy

London School of Economics & Political Science (LSE) - Department of Economics

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Date Written: August 2010

Abstract

This paper analyzes whether political outcomes in local democracies are determined by the preferences of the median - typically poor - agents or whether they reflect the wishes of the wealthy elites. A model shows that when politicians belonging to different groups can form coalitions, the wealthy elites' influence on policy choices is endogenously higher when there is diversity in preferences among the poor. In line with the theoretical predictions, the pattern of public good provision by local governments in Indonesia reveals that when individuals have different preferences — here due to different ethnicities — democratic policy outcomes are closer to the preferences of the elites, rather than the preferences of the poor majority.

JEL Classification: D61, D62, D63, H21, H23, K32

Suggested Citation

Bandiera, Oriana and Levy, Gilat, Diversity and the Power of the Elites in Democratic Societies: A Model and a Test (August 2010). LSE STICERD Research Paper No. EOPP018. Available at SSRN: https://ssrn.com/abstract=1717450

Oriana Bandiera (Contact Author)

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7519 (Phone)
+44 20 7055 6951 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gilat Levy

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6652 (Phone)

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