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Inequality, Development, and the Stability of Democracy – Lipset and Three Critical Junctures in German History

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  • Jung, Florian
  • Sunde, Uwe

Abstract

This paper studies the endogenous emergence of political regimes, in particular democracy, oligarchy and mass dictatorship, in societies in which productive resources are distributed unequally and institutions do not ensure political commitments. The political regime is shown to depend on resource inequality as well as on economic development, reflected in the production structure. The main results imply that for any level of development there exists a distribution of resources such that democracy is the political outcome. This distribution is even independent of the particular development level if the income share generated by the poor is sufficiently large. On the other hand, there are distributions of resources for which democracy is infeasible in equilibrium irrespective of the level of development. The model also delivers results on the stability of democracy. Variations in inequality across several dimensions due to unbalanced technological change, immigration or changes in the demographic structure affect the scope for democracy or may even lead to its breakdown. The results are consistent with the different political regimes that emerged in Germany after its unification in 1871.

Suggested Citation

  • Jung, Florian & Sunde, Uwe, 2011. "Inequality, Development, and the Stability of Democracy – Lipset and Three Critical Junctures in German History," Economics Working Paper Series 1127, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2011:27
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    Cited by:

    1. Jung, Florian & Sunde, Uwe, 2014. "Income, inequality, and the stability of democracy — Another look at the Lipset hypothesis," European Journal of Political Economy, Elsevier, vol. 35(C), pages 52-74.

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    More about this item

    Keywords

    Income inequality; development; democracy; coalition formation; factor endowments; demographic structure.;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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