Democracy and income inequality : an empirical analysis

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Democracy and income inequality : an empirical analysis, Volume 1

Author:	Gradstein, Mark; Milanovic, Branko; Ying, Yvonne;	Collection Title:	Policy, Research working papers ; no. WPS 2561
Date Stored:	2001/04/07	Document Date:	2001/03/31
Document Type:	Policy Research Working Paper	Language:	English
Major Sector:	(Historic)Economic Policy	Report Number:	WPS2561
Sub Sectors:	Macro/Non-Trade	SubTopics:	Governance Indicators; National Governance; Inequality; Human Rights; Poverty Impact Evaluation
Volume No:	1

Summary: Standard political economy theories suggest that democratization has a moderating effect on income inequality. But the empirical literature has failed to uncover any such robust relationship. The authors take another look at the issue. The authors argue that prevailing ideology may be an important determinant of inequality and that the democratization effect "works through" ideology. In societies that value equality highly there is less distributional conflict among income groups, so democratization may have only a negligible effect on inequality. But in societies that value equality less, democratization reduces inequality through redistribution as the poor outvote the rich. The authors' cross-country empirical analysis, covering 126 countries in 1960-98, confirms the hypothesis: ideology, as proxied by a country's dominant religion, seems to be related to inequality. In addition, while in Judeo-Christian societies increased democratization appears to lead to lower inequality, in Muslim and Confucian societies it has an insignificant effect. The authors hypothesize that Muslim and Confucian societies rely on informal transfers to reach the desired level of inequality, while Judeo-Christian societies, where family ties are weaker, use political action.


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