Inequality and Institutions
Peer Reviewed
Date issued
Apr 2004
Subject
Poverty;
Governance
JEL code
D70 - Analysis of Collective Decision-Making: General;
E24 - Employment • Unemployment • Wages • Intergenerational Income Distribution • Aggregate Human Capital • Aggregate Labor Productivity;
O15 - Human Resources • Human Development • Income Distribution • Migration;
O17 - Formal and Informal Sectors • Shadow Economy • Institutional Arrangements
Category
Working Papers
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.
