Hobbes to Rousseau: Inequality, Institutions, and Development

40 Pages Posted: 6 Jan 2005  

Matteo Cervellati

University of Bologna - Department of Economics; Institute for the Study of Labor (IZA); Instituto de Análisis Económic (IAE) Barcelona

Piergiuseppe Fortunato

University of Bologna - Faculty of Political Science

Uwe Sunde

Ludwig Maximilian University of Munich

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Date Written: January 2005

Abstract

We analyze the endogenous evolution of economic and political institutions and the interdependencies with the process of economic development. Favorable economic institutions ensure the appropriability of rents in form of a state of law. We study the conditions under which a state of law can be implemented under oligarchy, and when democratization is necessary. Inequality in endowments and incomes prolongs the absence of good institutions and delays democratization. Conversely, institutions shape the income distribution. Simulations illustrate how inequality affects the development process and may lead to overtaking and divergence. The implications are in line with historical and empirical evidence.

Keywords: inequality, democratization, institutions, state of law, long-term development

JEL Classification: H10, O20, N10

Suggested Citation

Cervellati, Matteo and Fortunato, Piergiuseppe and Sunde, Uwe, Hobbes to Rousseau: Inequality, Institutions, and Development (January 2005). IZA Discussion Paper No. 1450. Available at SSRN: https://ssrn.com/abstract=644324

Matteo Cervellati

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39-2092605 (Phone)
+39-2092664 (Fax)

Institute for the Study of Labor (IZA)

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

HOME PAGE: http://www.iza.org/

Instituto de Análisis Económic (IAE) Barcelona

Barcelona, Bellaterra 08193
Spain

Piergiuseppe Fortunato

University of Bologna - Faculty of Political Science ( email )

Via Giacomo della Torre 5
Forli 47100, 40100
Italy

Uwe Sunde (Contact Author)

Ludwig Maximilian University of Munich ( email )

Geschwister-Scholl-Platz 1
Munich, Bavaria 80539
Germany

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