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Inequality in developing economies: The role of institutional development

Author

Listed:
  • Joshy Easaw

    (University of Bath)

  • Antonio Savoia

    (University of Reading and Universitá di Salerno)

Abstract

In the present paper we study the distributive impact of institutional change in developing countries. In such economies, economic institutions, such as property rights systems, may act to preserve the interests of a rich minority, but this depends crucially on the level of political equality. For example, dominant classes can control key-markets, access to assets and investment opportunities, especially if they enjoy disproportionate political power. We test this hypothesis using cross-section and panel data methods on a sample of low- and middle-income economies from Africa, Asia and Latin America. Results suggest that: (a) increasing the protection of property rights increases income inequality; (b) such an effect is larger in low-democracy environments; (c) a minority of countries have developed a set political institutions capable of counterbalancing this effect.

Suggested Citation

  • Joshy Easaw & Antonio Savoia, 2009. "Inequality in developing economies: The role of institutional development," Working Papers 121, ECINEQ, Society for the Study of Economic Inequality.
    • Handle: RePEc:inq:inqwps:ecineq2009-121
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2009-121.pdf
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    Citations

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    Cited by:

    1. Savoia, Antonio & Easaw, Joshy & McKay, Andrew, 2010. "Inequality, Democracy, and Institutions: A Critical Review of Recent Research," World Development, Elsevier, vol. 38(2), pages 142-154, February.
    2. Ee, Mong Shan & Chao, Chi-Chur & Wang, Leonard F.S. & Yu, Eden S.H., 2018. "Environmental corporate social responsibility, firm dynamics and wage inequality," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 63-74.
    3. Samuel Adams & Edem Kwame Mensah Klobodu, 2019. "Urbanization, Economic Structure, Political Regime, and Income Inequality," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 142(3), pages 971-995, April.

    More about this item

    Keywords

    Inequality; developing economies; institutions; property rights; democracy;
    All these keywords.

    JEL classification:

    • 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
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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