Democracy and income inequality: an empirical analysis
DOI:
https://doi.org/10.14600/irpps_wps.72.2015Keywords:
Democracy, Income InequalityAbstract
In this paper I analyze the relation between democracy and income inequality. The literature review shows the presence of four main theoretical lines that explain differently this relation, from time to time as: a linear relation in which democracy affects income inequality; a linear relation in which economic inequality affects democracy; a non-linear relation, which takes the form of the so-called inverted “Uâ€; no statistical relation between democracy and income inequality. Our theoretical model expects that an increase in the quality of democracy within a state reduces, through two channels, the level of income inequality. First channel is a direct one and corresponds to the request of redistributive policies. Second channel is an indirect one and is represented by the increase in the quality of education. The econometric analysis using both a static and a dynamic approach shows empirical evidence supporting the existence of a non-linear and negative relation between democracy and income inequality.References
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