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Inequality and Institutions

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  • Alberto Chong
  • Mark Gradstein

Abstract

This paper presents theory and evidence on the relationship between inequality and institutional quality. We propose a model in which the two dynamically reinforce each other and set out to test this relationship with a broad array of institutional measures. We establish double causality between better institutional quality and a more equal distribution of income, but also demonstrate that the link from the latter dominates the former. These results are shown to be robust to various specifications and different data sources that cover various time-spans.

Suggested Citation

  • Alberto Chong & Mark Gradstein, 2004. "Inequality and Institutions," Research Department Publications 4361, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:4361
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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