Inequality%2C%20Democracy%2C%20Institutional%20Quality%2C%20and%20Fiscal%20Redistribution

Working Papers

Inequality, Democracy, Institutional Quality, and Fiscal Redistribution


CODE: WP-620
AUTHOR(s): Chong, Alberto , Gradstein, Mark
PUBLISHED: July 2007
LANGUAGE: English
RELATED TOPICS: Government and Democracy
DOWNLOAD FILE IN: English

Abstract:

This paper studies the joint effect of economic and political inequalities on redistributive taxation and institutional quality. The theoretical model suggests that income inequality, coupled with political bias in favor of the rich, decreases redistribution and lowers institutional quality. The effect of the former is to increase productive investment, and the effect of the latter is to decrease it—with resulting ambiguous implications for economic growth. Testing these predictions empirically in a panel of countries, the paper finds that inequality has a negative effect on both institutional quality and redistribution, especially in non-democratic countries.

Related Research by JEL Codes:
(or click here to find research by JEL Codes)

Hello, Welcome to the IDB!

Please join our mailing list by simply entering your email below.