IDEAS home Printed from https://ideas.repec.org/a/bla/metroe/v71y2020i3p510-532.html
   My bibliography  Save this article

Can income inequality promote democratization?

Author

Listed:
  • Laura Policardo
  • Edgar J. Sanchez Carrera

Abstract

The aim of this paper is to study the effect of income inequality on the probability of democratization, in a panel of 51 transition countries during the period 1960–2008. Using a conditional fixed‐effect logit estimation, we find robust results suggesting that income inequality (measured by the Gini index of household’s income inequality) has an inverse—U‐shaped relation with the probability of transition from autarchy to democracy. We show that there is a turning point at a level of household’s income inequality equal to a Gini index of 40. When income inequality is below 40, then probability of transition is positively related to inequality, but when inequality is higher, a subsequent increase in inequality decreases the probability of democratization. This is consistent with Acemoglu and Robinson’s theory that shows how transitions are likeliest at moderate levels of inequality, while autocracy is likelier at the lowest and highest levels of inequality.

Suggested Citation

  • Laura Policardo & Edgar J. Sanchez Carrera, 2020. "Can income inequality promote democratization?," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 510-532, July.
    • Handle: RePEc:bla:metroe:v:71:y:2020:i:3:p:510-532
    DOI: 10.1111/meca.12287
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/meca.12287
    Download Restriction: no
    File URL: https://libkey.io/10.1111/meca.12287?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
    2. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    3. Humberto Llavador & Robert J. Oxoby, 2005. "Partisan Competition, Growth, and the Franchise," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 1155-1189.
    4. Ravallion Martin, 2010. "Do Poorer Countries Have Less Capacity for Redistribution?," Journal of Globalization and Development, De Gruyter, vol. 1(2), pages 1-31, December.
    5. Bourguignon, Francois & Verdier, Thierry, 2000. "Oligarchy, democracy, inequality and growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 285-313, August.
    6. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    7. Edward Glaeser & Giacomo Ponzetto & Andrei Shleifer, 2007. "Why does democracy need education?," Journal of Economic Growth, Springer, vol. 12(2), pages 77-99, June.
    8. Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-573, October.
    9. Jenny A. Minier, 2001. "Is Democracy a Normal Good? Evidence from Democratic Movements," Southern Economic Journal, John Wiley & Sons, vol. 67(4), pages 996-1009, April.
    10. Dani Rodrik, 1999. "Democracies Pay Higher Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 707-738.
    11. Donaldson, David & Weymark, John A., 1980. "A single-parameter generalization of the Gini indices of inequality," Journal of Economic Theory, Elsevier, vol. 22(1), pages 67-86, February.
    12. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 158-183, December.
    13. Lipset, Seymour Martin, 1959. "Some Social Requisites of Democracy: Economic Development and Political Legitimacy1," American Political Science Review, Cambridge University Press, vol. 53(1), pages 69-105, March.
    14. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
    15. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 225-238.
    16. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
    17. Hirschman,Albert O., 1981. "Essays in Trespassing," Cambridge Books, Cambridge University Press, number 9780521282437.
    18. Papaioannou, Elias & Siourounis, Gregorios, 2008. "Economic and social factors driving the third wave of democratization," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 365-387, September.
    19. Bossert, Walter, 1990. "An axiomatization of the single-series Ginis," Journal of Economic Theory, Elsevier, vol. 50(1), pages 82-92, February.
    20. David L. Epstein & Robert Bates & Jack Goldstone & Ida Kristensen & Sharyn O'Halloran, 2006. "Democratic Transitions," American Journal of Political Science, John Wiley & Sons, vol. 50(3), pages 551-569, July.
      • David Epstein & Robert H. Bates & Jack Goldstone & Ida Kristensen & Sharyn O'Halloran, 2004. "Democratic Transitions," CID Working Papers 101, Center for International Development at Harvard University.
    21. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1167-1199.
    22. Przeworski,Adam & Alvarez,Michael E. & Cheibub,Jose Antonio & Limongi,Fernando, 2000. "Democracy and Development," Cambridge Books, Cambridge University Press, number 9780521793797.
    23. Weymark, John A., 1981. "Generalized gini inequality indices," Mathematical Social Sciences, Elsevier, vol. 1(4), pages 409-430, August.
    24. Daron Acemoglu & James A. Robinson & Thierry Verdier, 2004. "Alfred Marshall Lecture: Kleptocracy and Divide-and-Rule: A Model of Personal Rule," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 162-192, 04/05.
    25. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    26. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    27. Daron Acemoglu & James A. Robinson, 2002. "The Political Economy of the Kuznets Curve," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 183-203, June.
    28. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    29. Freeman, John R. & Quinn, Dennis P., 2012. "The Economic Origins of Democracy Reconsidered," American Political Science Review, Cambridge University Press, vol. 106(1), pages 58-80, February.
    30. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422.
    31. Przeworski,Adam & Alvarez,Michael E. & Cheibub,Jose Antonio & Limongi,Fernando, 2000. "Democracy and Development," Cambridge Books, Cambridge University Press, number 9780521790321.
    32. Horrace, William C. & Oaxaca, Ronald L., 2006. "Results on the bias and inconsistency of ordinary least squares for the linear probability model," Economics Letters, Elsevier, vol. 90(3), pages 321-327, March.
    33. Sebastian Ille & Adrian Risso & Edgar J Sanchez Carrera, 2017. "Democratization and inequality: Empirical evidence for the Organisation for Economic Co-operation and Development member countries," Environment and Planning C, , vol. 35(6), pages 1098-1116, September.
    34. Boix, Carles, 2011. "Democracy, Development, and the International System," American Political Science Review, Cambridge University Press, vol. 105(4), pages 809-828, November.
    35. José Cheibub & Jennifer Gandhi & James Vreeland, 2010. "Democracy and dictatorship revisited," Public Choice, Springer, vol. 143(1), pages 67-101, April.
    36. Lancaster, Tony, 2000. "The incidental parameter problem since 1948," Journal of Econometrics, Elsevier, vol. 95(2), pages 391-413, April.
    37. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sutirtha Bagchi & Matthew J. Fagerstrom, 2023. "Wealth inequality and democracy," Public Choice, Springer, vol. 197(1), pages 89-136, October.
    2. Bybert Moudjare Helgath, "undated". "Oil rent and the quality of institutions in Sub-Saharan African countries: Evidence using the dynamic panel threshold model," Review of Socio - Economic Perspectives 202192, Reviewsep.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sunde, Uwe & Fortunato, Piergiuseppe & Cervellati, Matteo, 2011. "Democratization and Civil Liberties: The Role of Violence During the Transition," CEPR Discussion Papers 8315, C.E.P.R. Discussion Papers.
    2. Cervellati Matteo & Fortunato Piergiuseppe & Sunde Uwe, 2012. "Consensual and Conflictual Democratization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-51, December.
    3. Cervellati, Matteo & Fortunato, Piergiuseppe & Sunde, Uwe, 2014. "Violence during democratization and the quality of democratic institutions," European Economic Review, Elsevier, vol. 66(C), pages 226-247.
    4. Stephen L. Parente & Luis Felipe Sáenz & Anna Seim, 2022. "Income, education and democracy," Journal of Economic Growth, Springer, vol. 27(2), pages 193-233, June.
    5. Matteo Cervellati & Piergiuseppe Fortunato & Uwe Sunde, 2008. "Hobbes to Rousseau: Inequality, Institutions and Development," Economic Journal, Royal Economic Society, vol. 118(531), pages 1354-1384, August.
    6. Boucekkine, Raouf & Piacquadio, Paolo G. & Prieur, Fabien, 2019. "A Lipsetian theory of voluntary power handover," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 269-291.
    7. Papaioannou, Elias & Siourounis, Gregorios, 2008. "Economic and social factors driving the third wave of democratization," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 365-387, September.
    8. Dahlum, Sirianne & Knutsen, Carl Henrik, 2017. "Do Democracies Provide Better Education? Revisiting the Democracy–Human Capital Link," World Development, Elsevier, vol. 94(C), pages 186-199.
    9. Nedra Baklouti & Younes Boujelbene, 2018. "The Nexus Between Democracy and Economic Growth: Evidence from Dynamic Simultaneous-Equations Models," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(3), pages 980-998, September.
    10. Ivar Kolstad & Arne Wiig, 2014. "Diversification and democracy," CMI Working Papers 9, CMI (Chr. Michelsen Institute), Bergen, Norway.
    11. Ghosal, Sayantan & Proto, Eugenio, 2009. "Democracy, collective action and intra-elite conflict," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1078-1089, October.
    12. Dorsch, Michael T. & Maarek, Paul, 2019. "Democratization and the Conditional Dynamics of Income Distribution," American Political Science Review, Cambridge University Press, vol. 113(2), pages 385-404, May.
    13. Markus Brückner & Antonio Ciccone & Andrea Tesei, 2012. "Oil Price Shocks, Income, and Democracy," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 389-399, May.
    14. Christopher J. Ellis & John Fender, 2014. "Public Sector Capital and the Transition from Dictatorship to Democracy," Manchester School, University of Manchester, vol. 82(3), pages 322-346, June.
    15. Pierre-Guillaume Méon & Khalid Sekkat, 2016. "A time to throw stones, a time to reap: How long does it take for democratic transitions to improve institutional outcomes?," Working Papers CEB 16-016, ULB -- Universite Libre de Bruxelles.
    16. Kammas, Pantelis & Sarantides, Vassilis, 2019. "Do dictatorships redistribute more?," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 176-195.
    17. Castelló-Climent, Amparo, 2008. "On the distribution of education and democracy," Journal of Development Economics, Elsevier, vol. 87(2), pages 179-190, October.
    18. Glawe, Linda & Wagner, Helmut, 2022. "Is schooling the same as learning? – The impact of the learning-adjusted years of schooling on growth in a dynamic panel data framework," World Development, Elsevier, vol. 151(C).
    19. Crespo Cuaresma, Jesus & Oberdabernig, Doris Anita, 2014. "Education and the Transition to Sustained Democracy," Department of Economics Working Paper Series 170, WU Vienna University of Economics and Business.
    20. Mulligan, Casey B. & Tsui, Kevin K., 2015. "Political entry, public policies, and the economy," Research in Economics, Elsevier, vol. 69(3), pages 377-397.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:metroe:v:71:y:2020:i:3:p:510-532. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0026-1386 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.