Inequality, Democracy, Institutional Quality, and Fiscal Redistribution

33 Pages Posted: 25 Apr 2011

See all articles by Alberto Chong

Alberto Chong

University of Ottawa

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

Date Written: July 2007

Abstract

This paper studies the joint effect of economic and political inequalities on redistributive taxation and institutional quality. The theoretical model suggests that income inequality, coupled with political bias in favor of the rich, decreases redistribution and lowers institutional quality. The effect of the former is to increase productive investment, and the effect of the latter is to decrease it—with resulting ambiguous implications for economic growth. Testing these predictions empirically in a panel of countries, the paper finds that inequality has a negative effect on both institutional quality and redistribution, especially in non-democratic countries.

Suggested Citation

Chong, Alberto and Gradstein, Mark, Inequality, Democracy, Institutional Quality, and Fiscal Redistribution (July 2007). IDB Working Paper No. 522, Available at SSRN: https://ssrn.com/abstract=1820910 or http://dx.doi.org/10.2139/ssrn.1820910

Alberto Chong (Contact Author)

University of Ottawa ( email )

2292 Edwin Crescent
Ottawa, Ontario K2C 1H7
Canada

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+97 2 8647 2288 (Phone)
+97 2 8647 2941 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
74
Abstract Views
915
rank
434,559
PlumX Metrics