Working Papers

Inequality and Institutions

CODE: WP-506
AUTHOR(s): Chong, Alberto , Gradstein, Mark
PUBLISHED: April 2004
RELATED TOPICS: Poverty Reduction and Labor


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.

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