Inequality, Democracy and the Emergence of Institutions

35 Pages Posted: 13 Feb 2004

See all articles by Mark Gradstein

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: January 2004

Abstract

This Paper considers the emergence of institutions as a political outcome, arguing that the support for protection of private property rights is stronger the higher is the economy's aggregate income and the more equal its distribution. When these conditions initially hold, the politically influential rich elite may prefer to relinquish its power through democratization in order to commit future policy-makers to the enforcement of private property rights, thus ensuring larger investment and growth. In a very unequal economy, however, this growth-enhancing democratization will not take place. These conclusions are shown to be consistent with the existing historical and cross-country evidence.

Keywords: Inequality, democracy, property rights

JEL Classification: D72, O11

Suggested Citation

Gradstein, Mark, Inequality, Democracy and the Emergence of Institutions (January 2004). Available at SSRN: https://ssrn.com/abstract=494842

Mark Gradstein (Contact Author)

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

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Centre for Economic Policy Research (CEPR)

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World Bank - Development Research Group (DECRG)

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