Does Liberte=Egalite? A Survey of the Empirical Links between Democracy and Inequality

Abstract

The effect of the distribution of political rights on income inequality has been studied both theoretically and empirically. Gradstein and Milanovic review the existing literature and, in particular, the available empirical evidence. The literature suggests that formal exclusion from the political process through restrictions on the voting franchise appears to have caused a high degree of economic inequality. And democratization in the form of franchise expansion has typically led to an expansion in redistribution, at least in the small sample of episodes studied. In a less pronounced way, albeit more emphatically compared with the ambiguous results of earlier research, recent evidence indicates an inverse relationship between other measures of democracy, based on civil liberties and political rights, and inequality.

The transition experience of Eastern European countries, however, seems to some extent go against these conclusions. This opens possible new vistas for research, namely the need to incorporate the length of democratic experience and the role played by ideology and social values.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to study the effects of inequality and poverty in the world. The study was funded by the Bank's Research Support Budget under the research project "Democracy and Redistribution" (RPO 683-01).